By Cecile Lefort
WELLINGTON, Sept 28 (Reuters) - The Australian and New Zealand dollars struggled for traction on Monday after the Federal Reserve revived expectations of a rate hike by year-end.
The Australian dollar AUD=D4 edged lower at $0.7026, little changed from late Friday in New York. Support was found at $0.6990 with resistance at $0.7045. It dropped 2.4 percent last week, largely on diverging rate outlook between the United States and Australia.
Markets give a one-in-three chance of a rate cut by the Reserve Bank of Australia to 1.75 percent before the end of the year. They are fully priced for a move by mid-2016. 0#YIB:
The Antipodean currencies found some relative comfort after data from the Commodity Futures Trading Commission showed speculators paring back bullish bets on the U.S. dollar. ID:nL1N11V2BS
"Leveraged funds raised their net shorts in the AUD, the first increase in five weeks," said ANZ in a note. "Similarly, they raised their net shorts in the NZD, partially reversing the reduction in the previous week.
Still, speculators remain heavily bearish on the Australian dollar.
Across the Tasman sea, the New Zealand dollar NZD=D4 was also quiet at $0.6382, having shed 0.5 percent last week. The kiwi was still in the well-defined range of $0.6244 to $0.6458 seen so far this month.
It dropped below 62 cents in August, a level not seen in six years.
Dealers said appetite for risk is likely to dictated by how Chinese stocks behave though markets could be choppy with China winding down for the week-long National Day holidays from Oct. 1.
New Zealand government bonds 0#NZTSY= were mostly steady.
Australian government bond futures were firmer, with the three-year bond contract YTTc1 up 1 tick at 98.140. The 10-year contract YTCc1 also added 1 tick to 97.2850.