Aussie Drops on Europe Concern; Kiwi Falls After Deficit Widens

The Australian dollar declined against the U.S. currency after Slovakia’s ruling coalition failed to end a dispute over participation in a euro-area bailout fund, damping demand for higher-yielding assets.

The New Zealand dollar fell against most of its 16 major peers after government financial statements showed the nation’s budget deficit was wider in the fiscal year ended June 30 than earlier forecast. Losses were limited for the South Pacific nations’ currencies as Asian stocks gained.

“Risk-correlated currencies could trade sideways over the next month as we wait for more positive developments out of Europe,” said Roland Randall, a strategist in Singapore at TD Securities Inc., who expects the Australian dollar could fall as low as 92 U.S. cents. “A bigger budget deficit does weaken the outlook for New Zealand at a margin and therefore make it more vulnerable to rising risk aversion.”

Australia’s dollar declined 0.4 percent to 99.44 cents at 11:15 p.m. in New York. It dropped 0.4 percent to 76.27 yen. New Zealand’s dollar slid 0.6 percent to 77.91 U.S. cents. The so-called kiwi lost 0.6 percent to 59.74 yen.

The MSCI Asia Pacific Index of shares advanced 1.8 percent, while the MSCI World Index gained 0.1 percent.

The leaders of the four governing parties of Slovakia, the euro region’s second-poorest member, are meeting today to discuss how to proceed with a vote on the euro-area bailout fund. Slovakia is the only euro-area country that hasn’t ratified the rescue measure.

New Zealand’s deficit widened to a record NZ$18.4 billion ($14 billion) in the year through June, from a NZ$16.7 billion estimate in the May budget, according to government financial statements released today in Wellington.

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