The Australian and New Zealand dollars backed off multi-month highs on Monday after hefty gains left the currencies overstretched, while liquidity is likely to be dampened by a holiday in Japan. The Australian dollar fell to $0.7584, having dropped a cent from Friday when it touched $0.7681, a level not seen since July last year. Much of the recent Aussie dollar strength is due more to shake-out in bullish US dollar bets following dovish signals from the Federal Reserve than domestic news.
"Market sentiment is coming to the conclusion that the USD fall has gone far enough for the moment, so we expect continued (AUD) consolidation," said ANZ. Still, the Aussie is sitting on steep gains, having jumped 6 percent this month. If sustained, it would be the largest monthly rise since 2011. Support was found at $0.7552.
The New Zealand dollar edged down over the weekend to $0.6773 after hitting a five-month high of $0.6874 on Friday. The Kiwi's losses came as the US dollar edged up after two straight days of selling, but the New Zealand currency's drop would likely be measured, dealers said. The Kiwi was expected to trade between $0.6760 and $0.6860, according to analysts, having gained 2.8 percent so far this month.
New Zealand government bonds rose, sending yields 1 basis point lower along the curve. Australian government bond futures eased, with the three-year bond contract off 3 ticks at 98.040. The 10-year contract also shed 3 ticks to 97.4200, while the 20-year contract slipped 3.5 ticks to 96.8500.
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