By Candice Zachariahs Jan. 15 (Bloomberg) -- The Australian and New Zealand dollars fell from near the strongest level in two months as concern over the sustainability of the global economic recovery damped demand for higher-yielding assets. Both currencies declined against the U.S. dollar and yen as the World Bank chief economist said a relapse into recession is a possibility. German Chancellor Angela Merkel yesterday said Greece’s mounting budget deficit risks hurting the euro, which faces a “very difficult phase.” “The Merkel comment on the Greece issue being a negative for the euro along with some negative speak from the World Bank” is hurting risk currencies, said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase & Co. in Sydney. “The Aussie is being taken lower by euro weakness.” Australia’s currency fell to 92.80 U.S. cents at 1:12 p.m. in Sydney from 93.18 cents in New York yesterday, when it touched 93.28, the highest since Nov. 18. It has risen 0.4 percent since Jan. 8 and is set to complete a three-week gain. The Aussie dropped to 84.48 yen from 85.68 yen on Jan. 8. New Zealand’s dollar weakened to 73.89 U.S. cents from 74.26 cents yesterday and traded 0.3 percent higher from last week. The kiwi bought 67.28 yen from 67.73 yesterday. World Bank chief economist Justin Lin said the global economic recovery may not be sustained and a relapse into a recession is a possibility. “My worry is about whether we’re going to have a sustainable recovery,” Lin said yesterday in a speech to the Council on Foreign Relations in Washington. “A second dip is a very likely scenario.” Jobs, Interest Rates The Australian currency headed for a week of gains against the dollar on bets the Reserve Bank of Australia will raise its key rate on Feb. 2 after a fourth month of jobs growth helped push down the unemployment rate. “The gap between interest rates in Australia and the U.S. is likely to widen for quite some time, making it attractive for investors to park funds in Australia,” said Amanda Tan, an economist at St. George Bank Ltd. in Sydney. “That should provide support to the currency for at least the next six months before the chances of major economies raising their rates become more real.” Swaps traders raised to 72 percent the chance of an interest-rate increase from the RBA next month after betting on a 62 percent probability on Jan. 8, according to a Credit Suisse AG index. Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. Australian government bonds rose. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 5.58 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.13, or A$1.30 per A$1,000 face amount, to 97.65. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.59 percent from 4.60 yesterday.

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