Aussie, N.Z. Dollars Fall Versus Yen as Europe Woes Damp Demand

The Australian and New Zealand dollars weakened against the yen as stocks dropped and concern increased the euro-zone debt crisis is escalating, damping demand for higher-yielding assets.

The South Pacific nations’ currencies slumped after Spain’s borrowing costs rose at an auction, increasing bets that the region’s financial contagion is spreading from Greece. The currencies rose against the U.S. dollar on speculation recent declines were overdone.

Australia’s dollar dropped 1.3 percent to 78.39 yen yesterday in New York and reached 78.37, the lowest level since Jan. 9. The Aussie weakened 0.3 percent to 98.88 U.S. cents, extending its drop this month to 5.2 percent.

The kiwi, as New Zealand’s dollar is known, weakened 1.5 percent to 60.51 yen, falling to 60.48, the lowest since Jan. 10. The currency declined 0.1 percent to 76.33 U.S. cents, adding to a 6.8 percent drop this month.

The Standard & Poor’s 500 Index (SPX) fell 1.5 percent, extending its losing streak to five days.

Spain sold bonds due in January 2015 at an average yield of 4.375 percent, compared with 2.89 percent when they were last auctioned in April. Investors bought bonds maturing in July 2015 at 4.876 percent, compared with 4.037 percent on May 3 and bonds due April 2016 at 5.106 percent.

The cost of insuring against a Spanish default rose to a record, with credit-default swaps on the nation’s bonds jumping 13 basis points to a record 553, according to data compiled by Bloomberg.

Borrowing costs in Europe’s most-indebted nations are rising amid speculation that Greece will leave the 17-nation euro area as political parties opposed to the terms of two international bailouts polled strongly. A fresh vote has been set for June 17.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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