April 24 — The euro fell for a second day against the dollar on speculation an industry report today will show German business confidence declined in April, indicating the currency’s strength is hurting Europe’s biggest economy.

The 15-nation currency has retreated from a record high as traders bet slowing growth will discourage the European Central Bank from raising interest rates to curb inflation at a 16-year high. The New Zealand dollar fell after the country’s central bank signaled it may cut borrowing costs later this year.

“The euro has room to fall further,” said Kenta Inoue, economist and currency analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s second-largest lender. “Traders had started pricing in the chance of an ECB rate increase. Signs of economic weakness mean traders are scaling back these expectations.”

The euro fell to $1.5850 at 11:40 a.m. in Tokyo, after dropping 0.6 percent yesterday. It reached $1.6019 on April 22, the highest level since the currency’s 1999 debut. The euro weakened to 164.08 yen from 164.28 yen. The dollar traded at 103.54 yen from 103.38. The euro may fall to $1.57 in the next two weeks, Inoue forecast.

The New Zealand dollar weakened to 79.31 U.S. cents from 79.86 U.S. cents and to 82.11 yen from 82.56 yen. The Reserve Bank of New Zealand decided to leave its benchmark rate at a record high of 8.25 percent. Governor Alan Bollard said borrowing costs will be unchanged “for a time yet,” compared with last month’s prediction of a “significant time.”

The Australian dollar fell to 94.61 U.S. cents from 94.92 cents in New York yesterday, when it reached a 24-year high of 95.41 cents, as prices of the commodities it exports declined.

Business Confidence

The Munich-based Ifo institute will probably say its business climate index, based on a survey of 7,000 executives, fell to 104.3 from 104.8 in March, according to the median forecast of 43 economists surveyed by Bloomberg News.

“Disappointing economic data out of Europe will surely lead to euro selling,” said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd. “It lends weight to the argument that the currency’s gains are having a negative impact on the economy.”

The euro may fall to $1.58 today, he said.

The euro also weakened after oil prices fell to 117.86 a barrel after surging to a record of $119.90 on April 22. European policy makers have been wary inflation will quicken on a 78 percent surge in crude oil from a year ago.

Oil Prices

The euro versus the dollar has had a correlation of 0.96 with oil over the past year, according to data compiled by Bloomberg. A reading of 1 would mean they move in lockstep.

The implied yield of the three-month Euribor future for December fell to 4.58 percent from 4.60 percent yesterday as traders reduced bets on the likelihood of an ECB rate increase. The contracts settle to the three-month inter-bank offered rate for the euro, which has averaged 18 basis points more than the ECB’s benchmark rate from 1999 until August.

The U.S. central bank has lowered the fed funds target by 3 percentage points since September to 2.25 percent to avoid a recession. Futures on the Chicago Board of Trade show an 82 percent chance the Fed will cut its benchmark by a quarter-point on April 30. The balance of bets is for no reduction.

Royal Bank of Scotland Group Plc, the fourth-biggest currency trader, predicted the Fed will lower rates by 0.25 percentage points this month, half its previous forecast.

“The markets have only priced in a 25 basis-point cut,” Masafumi Yamamoto, head of foreign-exchange strategy for Japan at the bank, wrote in a research note today. “This may confirm dwindling dollar-selling pressure since last week.”

The U.S. currency may move between $1.57 and $1.62 a euro this month, Yamamoto said.

Dollar Weakness

Dollar gains may be limited by speculation Commerce Department reports will show sales of new houses dropped to a 13-year low in March and growth in durable goods orders stalled.

Purchases of new homes, due at 10 a.m. in Washington, fell 1.7 percent to an annual rate of 580,000 in March from the prior month, according to a survey of economists by Bloomberg News. Demand for products made to last at least three years rose 0.1 percent in March, according to a separate survey before the report at 8:30 a.m.

“Today’s reports may pose downside risks for the dollar,” said Yuji Kameoka, a senior economist and currency analyst at Daiwa Institute of Research in Tokyo, a unit of Japan’s second- largest brokerage. “A weaker-than-expected report on durable goods may raise expectations of the Fed’s further rate cuts.”

The dollar may fall to 97 yen by June 30, Kameoka said.