The Australian and New Zealand dollars slipped to multi-month lows on the safe-haven Japanese yen on Monday, as investors were forced to scale back expectations for fiscal stimulus in the United States. The Aussie lost 0.9 percent on the yen to 84.12, near its lowest since early January, while the kiwi hit its lowest in four months at 77.71. Both also slipped on the euro and Swiss franc.
The commodity-leveraged currencies had benefited in recent months on hopes US President Donald Trump would quickly implement his pro-growth plan.
But Trump's failure last week to get approval for his signature healthcare plan raised concerns over the future of his entire agenda.
The market reacted by shifting to safe havens like gold and the yen, and away from risk trades and commodities. Copper was down around 1 percent, while Dalian iron ore futures shed another 5 percent after a steep slide last week.
The Aussie just about held steady at $0.7620, with the US dollar itself under pressure from disappointment over the healthcare defeat. The kiwi was just a shade firmer at $0.7046.
"The Republican Party controls the White House, Senate and House of Representatives, so its inability to reach agreement on a key issue raises new doubts over whether markets priced in the delivery of too much too soon in terms of business-friendly legislation," said Sean Callow, a senior currency strategist at Westpac.
"Ongoing turmoil in Washington seems likely to keep chipping away at the US dollar against the euro, the yen and the Swiss franc but the Aussie is unlikely to benefit much."
Callow said he looked for rallies in the Australian dollar to falter around $0.7725, with support returning around $0.7550.
Australian government bond futures rallied, as did most sovereign debt globally, in part on speculation the Federal Reserve might go slower on US rate hikes given the uncertainty over fiscal policy.
The Australian three-year bond contract rose five ticks to 98.060, while the 10-year contract added six ticks to 97.2700.
New Zealand government bonds followed, with yields down as much as 3.5 ticks at the longer end.