SYDNEY/WELLINGTON: The Australian and New Zealand dollars struggled to make headway on Monday, having proved indifferent to surprisingly weak US economic data and signs of stabilisation in emerging market currencies.
On a trade-weighted basis, the Aussie languished near three-year lows, with speculators slightly adding to their bets against the commodity currency.
Data from the Commodity Futures Trading Commission showed contracts in Australian net short positions increased to 63,200 the week ending Aug. 20 as the market still thinks the US Federal Reserve will begin tapering next month.
"Specs keep whacking the Aussie," said Sean Callow, a currency strategist at Westpac.
"They don't think the sell-off in the Aussie is over yet."
The Aussie was last at $0.9024, having dipped to $0.8970 on Friday and still looked fragile.
It shed 1.7 percent last week, weighed by Fed expectations to slow down its stimulus and turmoil in Asian currencies.
It managed to regain 90 cents following a weak reading of US home sales on Friday but there was no follow-through in Asian time.
Some traders said calmer emerging markets, with signs of stabilisation in the Indian rupee and Indonesian rupiah late last week, could support the commodity currency.
Resistance was found at $0.9060 with support at $0.8970.
The New Zealand dollar held a soft tone and was set to mark time in the near term as it waits for impetus to break out of the broad $0.7685 to $0.8135 range of the past couple of months.
The kiwi was last traded at $0.7801, having posted on Friday its largest weekly loss in nearly two years. Immediate support was found at $0.7760 and resistance at $0.7860.
"The main reason for this is likely to be continuing market expectations the Fed will start tapering QE (quantitative easing) in September," said Westpac senior currency strategist Imre Speizer in a commentary.
"There's also the RBNZ's (Reserve Bank of New Zealand) newly announced macro-prudential restrictions which could temporarily curb the housing market and credit growth during the next few months."
The market mood was not improved by data showing a trade deficit of NZ$774 million for July, the worst since September last year, driven by several significant big ticket items. The annual deficit more than doubled.
The data calendar this week is light with a business sentiment survey on Thursday, and building consents the main releases.
Speizer said a fall of the kiwi towards the low 70 NZ cents region was likely if the Fed announces significant tapering. If the Fed went more slowly, then the currency could head back towards $0.8400-0.8500.
New Zealand government bonds were trading with a bid tone that saw yields 5 basis points lower along the curve.
Australian government bond futures rose, pulling away from multi-week lows reached last week. The three-year bond contract added 3 ticks to 97.180, while the 10-year contract gained 6.5 ticks to 96.010.
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