SYDNEY/WELLINGTON: The Australian and New Zealand dollars struggled for momentum on Monday, having steadied from recent volatility as investors found little incentive to trade in the final two weeks of the year.
Many traders have already closed their books for 2014, and thin markets make for choppy conditions that are likely to keep all but the hardiest players on the sidelines.
The Aussie was flat at $0.8143, not far from a 4-1/2-year trough of $0.8107 plumbed on Wednesday. It has shed around 9 percent so far this year. "Commodity currencies, like the AUD and NZD, could remain under downward pressure until commodity prices stabilise. We see the AUD back in US$0.70s in the next few months," said John Peters, senior economist at Commonwealth Bank in Sydney.
Peters said markets will remain on edge as the issues around falling commodity prices, central bank policy divergence and growth disparities across the major economies play out.
Indeed, a growing number of analysts see the Aussie falling below 80 US cents next year as markets continued to speculate on an interest rate cut at home, while the US central bank geared up for a hike in rates.
Such an outcome should please the head of the Reserve Bank of Australia, who recently flagged that fair value was around 75 cents, partly to reflect this year's 50-percent plunge in the price of iron ore, Australia's single biggest export.
The New Zealand dollar eased 0.3 percent to $0.7728 , off an early high of $0.7765 after data showing a drop in consumer confidence added to the view that the economy is cooling.
Concerns the economy may have peaked amid a tumble in global prices for dairy products, the country's biggest export earner, have kept the kiwi in sight of a 2-1/2 year trough of $0.7660.
A break there would open the door to $0.7500, analysts say.
The kiwi has lost nearly 6 percent so far this year against the broadly resurgent US dollar, reversing gains made when the Reserve Bank of New Zealand began raising interest rates, which now stand at 3.5 percent. New Zealand government bonds edged up a touch, nudging yields as much as 2 basis points lower across the curve.
Australian government bond futures tracked a rebound in US Treasuries.
The three-year bond contract climbed 6 ticks to 97.790, while the 10-year contract gained 9.5 ticks to 97.130, erasing Friday's losses.
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