By Cecile Lefort and Charlotte Greenfield
SYDNEY/WELLINGTON, March 21 (Reuters) - The Australian and New Zealand dollars backed off multi-month highs on Monday after hefty gains left the currencies overstretched, while liquidity is likely to be dampened by a holiday in Japan.
The Australian dollar AUD=D4 fell to $0.7584, having dropped a cent from Friday when it touched $0.7681, a level not seen since July last year.
Much of the recent Aussie dollar strength is due more to shake-out in bullish U.S. dollar bets following dovish signals from the Federal Reserve than domestic news.
"Market sentiment is coming to the conclusion that the USD fall has gone far enough for the moment, so we expect continued (AUD) consolidation," said ANZ.
Still, the Aussie is sitting on steep gains, having jumped 6 percent this month. If sustained, it would be the largest monthly rise since 2011. Support was found at $0.7552.
A rising Aussie is not welcome news for the Reserve Bank of Australia (RBA) as the economy shifts from a mining boom to other areas more reliant on a lower currency such as tourism and education.
Investors are awaiting a speech from RBA Governor Glenn Stevens on Tuesday, who may take the opportunity to jawbone the runaway Aussie.
The New Zealand dollar NZD=D4 edged down over the weekend to $0.6773 after hitting a five-month high of $0.6874 on Friday.
The Kiwi's losses came as the U.S. dollar edged up after two straight days of selling, but the New Zealand currency's drop would likely be measured, dealers said.
The Kiwi was expected to trade between $0.6760 and $0.6860, according to analysts, having gained 2.8 percent so far this month.
New Zealand government bonds 0#NZTSY= rose, sending yields 1 basis point lower along the curve.
Australian government bond futures eased, with the three-year bond contract YTTc1 off 3 ticks at 98.040. The 10-year contract YTCc1 also shed 3 ticks to 97.4200, while the 20-year contract YXXc1 slipped 3.5 ticks to 96.8500.
The spread between 10-year and 3-year government bonds widened to 61 basis points, having earlier shrunk to the smallest in nearly a year. (Editing by Richard Pullin)