By Gyles Beckford and Ian Chua
SYDNEY/WELLINGTON, May 20 (Reuters) - The Australian and New Zealand dollars drifted up from multi-month lows on Monday, finding some traction after two weeks of steep declines as sellers took a breather ahead of key central bank events this week.
The Aussie edged up 0.6 percent to $0.9786 by 0520 GMT, pulling up from an 11-month trough of $0.9711 plumbed on Friday.
Initial support is seen around $0.9700, where option-related and real money bids have been cited. A clean break below would bring the 2012 trough of $0.9581 in focus.
The currency had slumped nearly 6 percent in two short weeks, forcing many to turn bearish. Data last Friday showed speculators held a rare net short AUD position in the week ended May 14.
'As such, the Aussie dollar may have now priced in a good deal of the shift towards negative sentiment,' said Greg Gibbs, strategist at RBS in Singapore.
The New Zealand dollar enjoyed a bit of a comeback as well, thanks to corporate buying. It climbed 0.8 percent on the day to $0.8121, off a six-month low of $0.8060 plumbed on Friday. Still, traders remained wary.
'We favour selling the NZ dollar into rallies as a new structural range appears to be developing,' said ASB Bank economist Daniel Smith.
'On the week we'd see the broad range in the NZ Dollar-U.S. dollar as $0.7950 to $0.8250.'
The sharp declines that both Antipodean currencies have suffered this month reflect in part a resurgent U.S. dollar, thanks to growing talk the Federal Reserve might dial down its massive stimulus programme later this year.
Fed Chairman Ben Bernanke will get a chance to shoot down such talk when he testifies before Congress on Wednesday. Bernanke has made clear that he does not expect to begin tightening policy anytime soon.
Ahead of Bernanke's testimony, the Reserve Bank of Australia (RBA) will release minutes of its May policy meeting when it cut rates to a record low 2.75 percent.
The report on Tuesday will give some colour on what was behind the decision, although the RBA has pointed to low inflation and a still high local dollar.
Investors are giving a less than one-in-five chance of a follow-up easing in June. However, the market is almost fully priced for a quarter-point cut by September.
On a trade-weighted basket, the Aussie should see a slightly higher fix from Friday's 74.8, its lowest in nearly a year. But it will still have some way to go to return to a 28-year peak of 80.2 set last month.
For the kiwi, gains of up to 0.5 percent against the yen, euro and sterling saw the kiwi's trade weighted index rise 0.4 percent.
The steadier performance in the antipodean currencies coincided with a rally in equity markets across most of Asia and waning demand for safe-haven government bonds.
Australian government bonds lost ground, with the three-year contract down 0.04 points at 97.460, while the 10-year contract shed 0.060 points to 96.775.
New Zealand government bonds were softer as well,
pushing yields as much as 5.5 basis points higher along the curve.
(Editing by Kim Coghill) Keywords: MARKETS AUSTRALIA NEWZEALAND/FOREX
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