By Cecile Lefort and Charlotte Greenfield
SYDNEY/WELLINGTON, May 22 (Reuters) - The Australian and New Zealand dollars hovered near multi-month lows against the euro and struggled to make friends versus their U.S. counterpart, with investors awaiting developments in Washington.
The euro rose to A$1.5034 EURAUD=R , not far from an eight-month peak of A$1.5074 touched last week. Against the New Zealand dollar EURNZD=R , it stood at NZ$1.6130, having touched a one-year peak of NZ$1.6235 on Friday.
The common currency is benefiting from a safe-haven flow due to political tumult in Washington and improving economic data.
The euro has gained 1.5 percent against both Antipodeans last week and charts point north as net long positioning on the euro versus the U.S. dollar touched its highest in more than three years in the week ended May 16, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
With so much attention on the euro, the Aussie dollar took a back seat against its U.S. counterpart. It stood at $0.7440 AUD=D4 , not far from last week's peak of $0.7458.
Dealers expect a period of consolidation for the Aussie which has sustained a bounce above the 61.8 percent retracement of the March-May move at $0.7388. Resistance is found near $0.7480
"Support for AUD is being generated by Australia's well-performing economy, a firm global economy and the likelihood that base metal and other industrial commodity prices are finding a base," said Elias Haddad, a strategist at Commonwealth Bank of Australia.
Prices of iron ore, Australia's top export earner, rose 1.8 percent .IO62-CNO=MB on Friday, its strongest level since May 4, according to Metal Bulletin.
CBA's Haddad, however, sees headwinds for the Aussie from U.S. political turmoil.
The New Zealand dollar NZD=D4 remained largely flat on Monday, hovering around $0.6920 but away from Friday's low of $0.6882.
The main local event investors anticipate this week is the New Zealand government budget, due on Thursday.
Strong tax revenue and slower-than-anticipated earthquake recovery spending was expected to contribute to a surplus significantly higher than the NZ$473 million ($327.51 million)forecast by the government in December.
New Zealand government bonds 0#NZTSY= eased, sending yields 1 basis point higher at the long end of the curve.
Australian government bond futures were also soft, with the three-year bond contract YTTc1 off 1 tick at 98.220. The 10-year contract YTCc1 edged down 2.5 ticks to 97.4750, while the 20-year contract YXXc1 was steady at 96.8900.
The spread between Australian and U.S. government bonds shrunk to 35 basis points, a whisker away from the smallest margin of 34 basis points touched in 2001. (Editing by Jacqueline Wong)