SYDNEY/WELLINGTON, Aug 29 (Reuters) - The Australian dollar fell to its lowest level in nearly a month after traders wagered on a U.S. interest rate following Federal Reserve Chair Janet Yellen's upbeat assessment of the economy.
However, the Aussie AUD=D4 shed most of the losses later in the session and in afternoon trading was mostly unchanged at $0.7549. Earlier, it touched $0.7525, its lowest level since Aug. 2.
The Aussie and the New Zealand dollars have been resilient in the face of domestic interest rate cuts this year due to carry trades, where investors borrow at low rates in yen, pounds or euros to buy higher-yielding assets such as the antipodean currencies.
On Monday, the Aussie was down 0.54 percent on the kiwi AUDNZD=R to NZ$1.0433.
The cross is off more than 2 percent far this year and analysts expect this downward trend to continue on expectations of firmer global dairy prices for New Zealand and weaker iron ore for resource-dependent Australia.
New Zealand is the world's biggest dairy exporter while iron ore is Australia's No. 1 commodity export.
"Together the trends we predict for the iron ore and dairy price suggest the terms of trade spread between Australia and New Zealand will continue to decrease," said Joseph Capurso, senior currency strategist at Commonwealth Bank.
"In turn, the downside pressure on AUD/NZD will continue in our view."
Overall, trading is expected to be subdued during the peak of UK summer holiday week and ahead of U.S. jobs figures on Friday.
In Australia, the focus will shift to a speech by assistant Reserve Bank governor Guy Debelle on Wednesday. Capital expenditure and retail sales numbers - both market sensitive releases - are due on Thursday.
The New Zealand dollar NZD=D4 was flat after hitting a one-week low of $0.7210 against the greenback earlier in the session.
The kiwi had risen as far as $0.7380 on Friday, it highest level since May 2015 before falling over the weekend to trade around $0.7239 on Monday.
"Outlook for US monetary policy remains the key driver of the NZD and an assumed Fed hike later in the year, most probably December, is required to get the currency back down towards the 0.70 mark," BNZ currency strategist Jason Wong wrote in a research note.
New Zealand government bonds 0#NZTSY= rose, sending yields 1 basis points lower at the short end of the curve and almost flat at the long end of the curve.
Australian government bond futures eased, with the three-year bond contract YTTc1 down 2 ticks at 98.60. The 10-year contract YTCc1 slipped 2.5 ticks to 98.11.