Aussie & Kiwi dlrs slide, pressured by China concerns

By Naomi Tajitsu

WELLINGTON, Feb 24 - The Australian and New Zealand dollars fell against the U.S. dollar on Monday as investors sold the Antipodean currencies as a proxy for the Chinese yuan, which has struggled on concerns over slowing growth in Asia's economic powerhouse.

The Antipodean currencies extended losses, tracking a sell-off in the yuan CNY=CFXS CNH= from last week. The Aussie and kiwi often move in step with the yuan due to their exposure to China, a big importer of Australian and New Zealand natural resources.

Signs of weakening in the world's second biggest economy have weighed on the yuan, and the People's Bank of China last week guided the yuan lower in a market still hamstrung by the lack of full convertibility of the currency.

On Monday, the PBOC set a mid-point of 6.1189 versus the U.S. dollar, slightly higher than 6.1176 on Friday CNY/ .

"Chinese data has been mixed, and there's growing concerns about the country's shadow banking system," said Tim Kelleher, head of institutional sales at ASB.

"So if we see more selling in the yuan, the Aussie and the kiwi will also struggle."

The Aussie AUD=D4 fell 0.4 percent to $0.8944, hurt by a 1.7 percent slide in Chinese stocks .SSEC and closing in on a one-week low of $0.8937 hit last week.

Technical support was seen around $0.8915-$0.8925, where the currency's 21- and 55-day moving averages lay, along with the 23.6 percent of the Aussie's October-January sell-off.

The New Zealand dollar NZD=D4 slipped to $0.8262, edging towards a two-week low of $0.8242 hit last week. Bids were seen around $0.8200, market participants said.

Foreign exchange markets offered little reaction to a weekend meeting of G20 finance ministers and central bankers in Sydney as its final communique offered no direct reference to currencies. News Search ID:nL3N0LS0IP

Market participants said the Aussie and the kiwi would remain vulnerable to further yuan selling. However, some analysts believe the Aussie could benefit on more signs that the Australian economy is improving after a slowdown driven by sluggishness in the mining sector.

The Reserve Bank of Australia's recent shift to a neutral stance on rates from an easing bias has also underpinned the Aussie.

Analysts said a break above $0.9000 is possible in the near term, especially if the market repositions its bearish tilt on the Aussie, although any significant strength would likely prompt the RBA to talk the currency down.

"People are still quite short, so if we were to get better-than-expected data which validates the idea that if the RBA is on hold, the next move could be up, that could put a slightly different complexion on the Aussie," said Sally Auld, currency strategist at JPMorgan Securities in Sydney.

Still, she said the currency is more likely to be hemmed between $0.8600 and $0.9100 for much of this year: "Until people get more confident in that story, I can't see the range changing too much."

The kiwi has been supported by expectations that New Zealand interest rates will begin rising next month, while the economy is seen outperforming in 2014.

Australian government bond futures inched up, with the three-year bond contract YTTc1 up 0.020 point to 96.970. The 10-year contract YTCc1 rose the same amount to 95.860.

New Zealand government bonds were also a touch higher, with yields a basis point lower across the curve.

(Editing by Shri Navaratnam)

((naomi.tajitsu@thomsonreuters.com))

Keywords: MARKETS AUSTRALIA/FOREX