Dec. 15 (Bloomberg) -- The Australian and New Zealand dollars fell for the first time this week against the greenback after Treasury yields climbed, narrowing the yield advantage of assets in the South Pacific nations. The so-called Aussie dropped against 15 of it 16 major counterparts as Asian stocks fell on concern China will act further to slow inflation, pointing to waning investor demand for higher-yielding assets. New Zealand’s dollar fell the most in a week after the nation’s consumer confidence declined. “We are seeing a decent pick up in U.S. yields,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “Yield spreads are generally heading in the U.S.’s favor. And we saw a little bit of profit taking above the parity level.” Australia’s currency fell to 99.54 U.S. cents as of 4:08 p.m. in Sydney from 99.90 cents in New York yesterday, when it touched $1.0029, the most since Nov. 11. The currency bought 83.45 yen from 83.57 yen. New Zealand’s dollar dropped 0.3 percent to 74.94 U.S. cents and was at 62.81 yen from 62.89 yen. Treasury yields jumped after Federal Reserve policy makers said yesterday the U.S. recovery is continuing and refrained from expanding a $600 billion program of debt purchases. The central bank retained a commitment to keep its benchmark interest rate low for an “extended period,” holding the target rate for overnight lending between banks at zero to 0.25 percent, where it has been since December 2008. The 10-year note yield climbed to as high as 3.50 percent today, the most since May 14, before retreating to 3.45 percent. It rose as much as 22 basis points yesterday. Extra Yield The extra yield investors get from buying Australia’s 10- year government bonds instead of U.S. Treasuries reached 2.14 percentage points yesterday, the least since July 16. The premium offered by three-year government debt in New Zealand over the U.S. reached 3 percentage points yesterday, the narrowest since April 26. Benchmark interest rates are 4.75 percent in Australia and 3 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. A gauge of New Zealand consumer confidence declined to 112.2 in December from 114.5 last month, according to an index compiled by ANZ National Bank Ltd. and Roy Morgan Research. Additional Tightening Concern Demand for the South-Pacific nations’ currencies was also limited on prospects China will take further steps to tame inflation and slow the world’s fastest-growing major economy after refraining from raising interest rates last week. China is Australia’s largest trading partner and New Zealand’s second- biggest export market. The city of Beijing may introduce additional measures aimed at curbing home price gains in the Chinese capital, the China Daily reported today, citing Xu Zhijun, spokesman for the Beijing Municipal Commission of Housing and Urban-Rural Development. Chinese consumers signaled their deepest concern with inflation since 1999, according to the central bank. The People’s Bank of China survey of 20,000 people in 50 cities showed 74 percent considered prices too high, 15.6 percentage points more than in the third quarter, the bank said on its website today. China’s consumer prices climbed 5.1 percent in November, the fastest pace in 28 months, the statistics bureau reported last week. “Markets are still concerned about whether China will tighten its policy,” said Hitoshi Asaoka, senior strategist at Mizuho Trust & Banking Co. in Tokyo, a unit of Japan’s second- largest bank. “That may continue to weigh on the Aussie and kiwi.” The MSCI Asia Pacific Index of regional shares fell 0.6 percent, while the Shanghai Composite Index, which tracks the bigger of China’s stock exchanges dropped 0.2 percent. --Editors: Jonathan Annells, To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net; To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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