By Cecile Lefort and Naomi Tajitsu
SYDNEY/WELLINGTON, Aug 24 (Reuters) - The Australian and New Zealand dollars dropped to two-year lows against the yen as worries about the Chinese economy sent investors rushing to safe haven assets.
Worries about a slowing Chinese economy flared up on Friday after a survey showed a further deterioration in manufacturing activity. Adding to the jitters, the Shanghai stock market .SSEC was down 6 percent in early trade on Monday.
The Antipodean currencies are sensitive to news out of China, a top export market for both Australia and New Zealand. They suffered the most against the yen on Monday as investors sought the relative safety of the Japanese currency.
The Aussie dropped below 88 yen AUDJPY=R for the first time in two years. It was last at 88.16, having shed around 1 percent.
The New Zealand dollar skidded 1.7 percent to around 80 yen, a level not seen since 2013.
Against the U.S. currency, the Australian dollar sank to $0.7241, from $0.7315 in New York on Friday, pulling closer to a six-year trough of $0.7217 touched earlier in the month.
The Aussie is down 11 percent so far this year.
Investors cut bearish positions in the euro, helping lift it to A$1.5771, its highest since early 2014. It has gained 21 cents in four months and the next big level is A$1.5831. A break would propel it to a five-year peak.
The pound vaulted to six-year highs at A$2.1644.
Across the Tasman sea, the New Zealand dollar NZD=D4 fell 1 percent to a session low of $0.6603, retreating from a three-week high of $0.6708 set last week.
Ongoing disruptions in global markets have cut short a run of short covering which has bolstered the kiwi in past weeks. Analysts said risk aversion and the prospect of further interest rate cuts in New Zealand would likely push the kiwi lower in the coming days.
"If we're going to have a stronger kiwi and lower oil prices, that disinflationary environment might lead the Reserve Bank to cut more aggressively than market pricing," BNZ currency analyst Raiko Shareef said.
BNZ expects the kiwi to fall to $0.6200 before the year is out, weakening as the Reserve Bank of New Zealand cuts its benchmark lending rate by an additional 50 basis points as economic growth stalls.
New Zealand government bonds edged up, pushing yields as much as 3 basis points lower across the curve.
Australian government bond futures rallied to four-month highs, with the three-year bond contract YTTc1 up 6 ticks to 98.250. The 10-year contract YTCc1 added 5 ticks to 97.4300. (Editing by Ryan Woo)