SYDNEY/WELLINGTON: The Australian dollar struggled near three-month lows on Monday, still feeling the heat from the Reserve Bank of Australia's recent intervention threat, while the New Zealand dollar managed to bounce off a multi-week trough.
The Aussie was beaten across the board to be at 70.5 on a trade-weighted basis, the lowest since early September.
Traders said the commodity currency could continue to struggle particularly if tensions between China and Japan grew.
China at the weekend suddenly imposed new rules on airspace over islands at the heart of a territorial dispute with Tokyo, prompting Japan and ally the United States to warn of an escalation into the "unexpected" if Beijing enforces the rules.
Against the US dollar, the Aussie slipped as far as $0.9143 on Friday, its weakest in nearly three months, to last trade at $0.9180.
It fell 2.1 percent last week and charts show further downside.
The currency ended the week below a key retracement level of $0.9195, suggesting a fall under $0.9000 could be on the cards.
Further support was seen around $0.9097, the 76.4 percent retracement of its August to October rally.
It even came under pressure against a depressed yen which was used for carry trades where investors borrow the Japanese unit at low rates to buy higher-yielding assets.
The Aussie shed more than two yen in four sessions to fetch 92.82 yen, near a trough of 92.49 set Friday.
Much of the pressure for the Aussie came after Reserve Bank of Australia (RBA) Governor Glenn Stevens said he was "open-minded" about intervening to weaken the currency.
"It's about the mindset at the moment.
The RBA had its two cents last week and it's mission accomplished from that perspective," said Michael Turner, a strategist at Royal Bank of Canada, seeing the Aussie remaining under pressure in the near-term. He said any bounces are likely to be short-lived with the Aussie vulnerable to news about the timing of the Federal Reserve's stimulus tapering.
The New Zealand dollar was hanging on at $0.8200 having slumped to a two-month low of $0.8125 on Friday.
Contending technical influences suggest the kiwi's bounce back above the 200-day moving average at $0.8168 points to gains, but also that it currently has negative momentum, which will keep it in check.
"This somewhat mixed set of indicators suggests the NZ dollar may continue to drift sideways this week.
This is especially so given the dearth of big market moving events," said Bank of New Zealand strategist Mike Jones.
Near-term support is seen initially at $0.8150 and then more solidly at Friday's low of $0.8125, with resistance at $0.8245.
The kiwi was drawing support with gains on most majors, notably the Aussie, yen and euro.
The trade weighted kiwi measured against a basket of currencies was up 0.2 percent.
New Zealand has mainly second tier data this week, including trade, business confidence, and building consents, which are likely to reflect the overall solid pace of economic growth. New Zealand government bonds edged lower, sending yields a couple of ticks higher across the curve.
Yields of 10-year Australian government cash bond took a breather from 20-month highs to last trade at 4.28 percent.
They reached 4.35 percent on Friday. Australian government bond futures edged up with the three-year bond contract 1 tick higher at 96.860. The 10-year contract added 3 ticks to 95.765, with the yield curve flattening.
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