Australian dollar mauled by pound & euro

* Pound highest since 2009 vs Aussie, 18-mth peak vs NZD

* Euro buoyed by ECB & annual flow rebalancing

* Aussie near 3-1/2-year low vs USD

By Cecile Lefort and Naomi Tajitsu

SYDNEY/WELLINGTON, Dec 30 (Reuters) - The Australian dollar hovered near multi-year lows against the U.S. dollar, pound and euro on Monday as funds shifted into Europe and the United States from emerging markets.

The Aussie AUD=D4 slipped to $0.8850, continuing its drift from Friday's peak of $0.8930 and pulling closer to the recent 3-1/2-year trough of $0.8820. A break below would target $0.8770.

The currency has shed 15 percent so far this year in its first annual drop since 2008. The recent sharp move lower will please the Reserve Bank of Australia, which is concerned about the damaging impact of a high currency on the local economy.

The central bank's stance is one reason the market expects it will not ease rates any further from the current record low of 2.5 percent. Interbank futures 0#YBA: imply only a one-in-four chance of a cut in rates.

The Aussie was nursing hefty losses against the euro at A$1.5523 EURAUD=R . The common currency scaled a four-year peak near A$1.5600, having found support from comments by European Central Bank President Mario Draghi that he saw no urgent need to cut interest rates again and no signs of deflation. Href="NewsSearch">TOP/CEN

While thin year-end conditions can exacerbate trading moves, the euro also gained from the cyclical repatriation of funds.

"The spikes in FX are likely re-balancing flow and we could see them across the board in many currencies," wrote National Australia Bank in a note to clients.

The euro has gained an eye-watering 22 percent so far this year for its biggest annual jump on record. Technicals suggest further upside with A$1.5597 seen as the first hurdle higher.

The Aussie fall was even more pronounced against a racy pound which crept up to A$1.8620 GBPAUD= in Asian trade, a level not seen since 2009. Against the kiwi, sterling touched an 18-month peak just above NZ$2.0000 GBPNZD= on Friday.

The New Zealand dollar NZD=D4 was largely flat on the day at $0.8150, after poking up to a session high of 0.8177 in early trade.

The kiwi edged up against the broadly weak Aussie

AUDNZD=R , which slipped 0.2 percent to around NZ$1.0845. A stronger economic outlook in New Zealand has kept the currency in sight of a five-year high around NZ$1.0730.

The kiwi has outperformed many major currencies this month thanks to strong economic fundamentals and expectations that interest rates will start rising early next year.

However, the currency has eased against the U.S. dollar in the past week or so as investors have booked profits on its rally to $0.8336 earlier this month, while a lack of further evidence of a galloping economy has stalled its upward rise.

The kiwi's slip below a key technical level of $0.8162, its 200-day moving average, opened the door to a fall towards $0.8084, a 1-1/2-month low.

Still, bids suspected below $0.8100 were seen supporting the currency, while any upside was likely to be capped at $0.8198, its 100-DMA.

New Zealand government bonds 0#NZTSY= were little changed on the day.

Australian government bond futures were mixed with the three-year bond contract YTTc1 steady at 96.960. The 10-year contract eased 1 tick to 95.760.

(Editing by Richard Pullin)

((Cecile.Lefort@thomsonreuters.com)(+61 2 9373-1234)(Reuters Messaging: cecile.lefort.thomsonreuters@reuters.net))

Keywords: MARKETS AUSTRALIA/FOREX