SYDNEY/WELLINGTON: The Australian dollar drifted to an 18-month trough against the euro on Monday and kept away from a nearly one-year low versus its US counterpart, with markets cautious of any deterioration in risk sentiment.
The Aussie paused at $0.9627 by 0521 GMT, from $0.9645 in New York on Friday, and was still very near the nearly one-year low of $0.9593 touched last week.
It kept a heavy tone on a trade-weighted basis, hovering near a one-year trough of 74.3 as the euro climbed to A$1.3460, its highest since November.
"The story is a) concerns around the European crisis have significantly reduced and b) the deteriorating outlook in China," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore, seeing the euro rising towards A$1.4000.
The euro last fetched A$1.3418 in thinned trading due to holidays in the United States and Britain.
The common currency has gained nearly 10 percent since early April and with the 5-, 10- and 20-day moving averages pointing north, there is little to suggest a reversal of the momentum.
Traders cited stops above A$1.3500 and a break would open the way to the November 2011 peak of A$1.3809.
Against the US dollar, the Aussie has skidded 7 percent this month on speculation the US Federal Reserve may soon scale down its massive stimulus programme.
Last week, currency speculators increased bets against the Aussie, with net short positions jumping to 32,409, from 13,450, a week earlier, according to data from the Commodity Futures Trading Commission.
Concerns about a slowing economy in China and falling commodity prices have also contributed to markets narrowing the odds for further easing in Australia. Investors were giving a 22 percent chance of a follow-up rate cut in June to a record low of 2.5 percent.
Key Aussie support was seen at the 2012 trough of $0.9581 and a break would open the way to $0.9388, the weakest since October 2011. Immediate resistance was seen at $0.9700.
The New Zealand dollar was pressured lower to $0.8074, from $0.8106 in early trade, having touched an 8-1/2-month low last week of $0.8006. It has shed more than 5 percent this month.
"While USD bullishness stemming from talk of an early paring back of QE (quantitative easing) seems overdone, it is likely to keep (the) NZD under pressure."
Support was seen at $0.8040, ahead of the year's trough of $0.8006, while resistance was found at $0.8140.
New Zealand's data calendar is thin this week with building, terms of trade, and business sentiment. Investors are likely to take a close look at data on Thursday for further insight on the central bank's foreign exchange dealings last month, after the governor said the bank had been active in the forex market.
New Zealand government bonds were becalmed with yields a tick lower along the curve.
Australian government bond futures were a touch firmer, with the three-year contract up 0.02 point at 97.420, while the 10-year contract also gained the same amount to 96.710.
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