SYDNEY/WELLINGTON: The Australian dollar hovered near four-year lows on Monday as global growth concerns encouraged investors to unwind carry trades, while the New Zealand dollar remained vulnerable to further losses though it managed to stabilise somewhat.
The Australian dollar edged down to $0.8670, from $0.8700 in New York on Friday, pulling close to a four-year trough of $0.8642 touched last week. A break there would open the way to a retracement to $0.8066, the May 2010 low.
Dealers cited buyers around $0.8650.
Data from the Commodity Futures Trading Commission showed a rise in investors betting against the Aussie with contracts in Australian dollar net short positions climbing to more than 26,000 in the week of Oct 7, from 2,000 the week before.
"It's pretty easy to see the reason behind the positioning," said Stephen Innes, senior trader at OANDA Asia Pacific.
"Commodities are free falling, the possibility for a Chinese hard landing, the increasing volatility hurting the carry trader and the Reserve Bank of Australia (RBA) actively talking the currency down - all these are being interpreted by the traders as heavy sell signals over the short term," Innes said.
Not helping the Aussie was heavy selling against the yen as investors trimmed popular carry trades where the market borrows at low rates in yen to buy higher yielding assets, such as the Aussie.
Japanese financial markets were closed on Monday but that didn't stop the Aussie from touching a six-month trough of 92.82 yen.
The Aussie has shed three yen in as many sessions to be last at 93.02 with charts showing 92.25 as key support.
Immediate focus is on Chinese trade data and any disappointment will no doubt keep investors in a 'risk off' mode. China is the top export market of Australia and New Zealand.
Across the Tasman sea, the New Zealand dollar edged up to $0.7837, pulling away from a 14-month trough of $0.7708 touched late September.
Against the yen, the kiwi was at 84.00 yen, not far from an eight-month low around 83.65 yen.
But if risk aversion intensifies, analysts anticipated more losses for the kiwi after it broke below key support at 84.00 yen, the bottom of the 84.00-89.00 yen range which has hemmed the pair for much of the year. "Should market sentiment steadily worsen, we envisage a slow decline toward 83.0 yen," BNZ analysts said in a note.
The kiwi clawed back against the Aussie which fell around 0.5 percent to NZ$1.1058. But despite the kiwi's gains on Monday, many in the market see more losses in the near- to mid-term, particularly if global dairy prices continue to fall, slashing the value of the country's biggest export earner.
Following a near 50 percent fall in dairy prices so far this year, a further slide at a fortnightly auction to be held on Wednesday could knock the kiwi towards a 14-year low of $0.7708 hit late last month.
New Zealand government bonds rallied on the back of gains in US Treasuries last week, pushing yields 5.5 basis points lower across the curve.
Australian government bond futures rose to multi-week highs, with the three-year bond contract up 4 ticks at 97.440. The 10-year contract added 5 ticks to 96.690.
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