The euro dropped against the dollar and yen as an industry report showed German business confidence fell to the lowest in more than two years in April, indicating the currency's strength may be curbing economic growth.

The 15-nation currency also retreated from near a record high against the U.S. dollar as French business confidence declined to a 16-month low, prompting traders to bet the European Central Bank won't raise interest rates to curb inflation. The dollar rose against the yen on speculation the Federal Reserve will pause its rate-cut campaign after next week. The New Zealand dollar slid after the country's central bank signaled it may lower borrowing costs later this year.

The data ``marked something of a watershed in terms of euro- dollar,'' said Adam Cole, head of global currency strategy in London at Royal Bank of Canada, the nation's biggest lender. ``It makes euro gains much harder to come by'' and the currency may decline to $1.40 by the end of the year, he said. That compares with an average forecast of $1.48 in a Bloomberg survey.

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The euro fell 0.9 percent to $1.5759 per dollar at 6:27 a.m. in New York, from $1.5889 yesterday. It traded at $1.6019 on April 22, the highest level since its 1999 debut. The euro dropped to 163.32 yen, from 164.28 yen. The dollar rose to 103.64 yen from 103.38.

The New Zealand dollar weakened to 79.25 U.S. cents, from 79.86 cents yesterday in New York and to 82.12 yen from 82.56 yen. The Reserve Bank of New Zealand left 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.''

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