SYDNEY/WELLINGTON: The Australian dollar sank to a near three-year low against a broadly firmer US dollar on Monday as the market continues to price in an eventual slowdown in stimulus from the Federal Reserve.
Aussie slumps to $0.9110, plumbing its weakest level since September 2010 in early trade before stabilising around $0.9128.
New Zealand dollar slides to $0.7690 in early trade, closing in on a one-year low of $0.7683 hit last month before clawing back to $0.7720.
Investors await two readings of Chinese PMI later Monday . Weak readings could trigger more selling in the Antipodean currencies.
The Reserve Bank of Australia (RBA) meets on Tuesday but is thought unlikely to cut rates again, in part due to the drop in the Aussie.
Any suggestion that more easing may be coming, or that the central bank would like to see a lower currency could lead to further Aussie weakness.
"We expect a re-iteration of the view that the AUD remains "at a historically high level", despite its recent fall. This will be negative AUD/USD, in our view," analysts at Barclays Capital said in a note.
A sustained break below major technical support at $0.9133, the 38.2 percent retracement of its the Aussie's 2008-2011 rally, could lead to more losses, with traders anticipating a test of $0.9000 in the near term.
Antipodean currencies extended losses after Fed Governors Jeremy Stein and Jeffrey Lacker on Friday separately took on a more aggressive tone on reducing monetary accommodation, with Stein saying September could be a good time to consider scaling back.
The prospect of a pull-back in Fed stimulus knocked the Aussie down roughly 5 percent versus the greenback and the kiwi around 3 percent last month.
A fall in commodity prices to a one-year low on Friday also knocked the Aussie, as it is a major exporter of iron ore and other resources.
Fed expectations have hit the Aussie particularly hard as investors are also dumping the currency as a proxy for less liquid Asian currencies.
Aussie, kiwi risk more losses if readings of US manufacturing and employment due this week add to the argument for a stimulus reduction.
Kiwi sees initial support at $0.7683, but a fall below that level opens the door to a fall towards $0.7456, its 2012 trough. * Australian government bonds poised to edge lower, with the 10-year contract indicated 0.020 points lower at 96.205. The three-year contract indicated unchanged at 97.220.
New Zealand government bonds little changed in early trade.
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