* High-flying commodity currencies set to lose ground
* Pause in major central bank easing to curb appetite
* Worries about China growth to hurt Aussie most
By Anirban Nag
LONDON, March 20 (Reuters) - The growth-linked Australian and New Zealand dollars may lose their shine in coming months as central banks that have poured billions into their economies and kept interest rates ultra-low pause to assess the impact.
These currencies have had a good start to 2012 as have riskier assets like stocks and commodities, with which they tend to move in tandem as the economic outlook improves, but analysts say they will struggle to advance further as policymakers consider whether more stimulus is necessary.
Signs of slowdown in China, a major market for Australia's natural resources, may deal an extra blow to the Aussie.
Shares, commodities and higher-yielding currencies have rallied in the past two months, supported by pledges to keep interest rates near zero in much of the developed world to aid economic recovery. On top of that, investors have put some of the billions of dollars created through monetary stimulus into these assets.
But this central bank largesse may have reached its limit.
"The Australian dollar and to a lesser extent the New Zealand dollar would come under pressure in the months ahead as we think major central banks will be a bit more reluctant in pumping in more funds," said Ian Stannard, head of European FX strategy at Morgan Stanley.
The European Central Bank injected nearly a trillion euros into the banking system via cheap long-term loans in December and last month, the Bank of Japan decided in February to print more money as did the Bank of England while the U.S. Federal Reserve pledged to keep rates near zero until 2014.
Some analysts say the Fed could still launch a third round of quantitative easing later this year if unemployment stays high or the U.S. recovery is derailed by higher oil prices.
But such expectations were somewhat dampened last week when the Fed's rate-setting committee upgraded its economic outlook slightly and gave few clues on whether it was considering further easing.
Influential New York Fed President William Dudley said the central bank had not yet decided whether to embark on so-called QE3 but that it remained an option.
The ECB opted at its March policy meeting not to inject more cash into the banking system as funding pressures eased and as a messy Greek default was avoided, while the Bank of Japan refrained from another round of stimulus earlier this month.
This all means there is likely to be less spare cash in the global financial system to chase the Australian and New Zealand dollars in coming months, which, at 4.5 percent and 2.5 percent respectively, have the highest rates in the developed world.
Demand from investors and speculators seeking to fund their purchases of these higher-yielding currencies by borrowing in low-yielding ones like the U.S. dollar and the Japanese yen has seen the Australian dollar gain nearly 3 percent against the dollar this year.
The New Zealand's currency has also advanced 5.5 percent against the greenback since the start of the year.
But Morgan Stanley's Stannard expects the Australian dollar to drop below parity against the U.S. dollar over the course of 2012, from around $1.0520 now, as signs emerge of a slowdown in Asian powerhouse China.
China is resource-rich Australia's largest trading partner. A much larger-than-expected Chinese trade deficit in February as exports slowed, along with worries that Chinese authorities may not move quickly and effectively enough to support economic growth, are likely to hurt the Australian dollar.
On Tuesday, the world's biggest miner, BHP Billiton, said there was evidence of "flattening" iron ore demand there.
"With signs that China is slowing, long Australian dollar and short U.S. dollar positions will come under pressure," said Adrian Schmidt, currency strategist at Lloyds TSB.
Westpac, a top Australian bank, expects concerns about a slowdown in China to keep the Aussie under pressure not just against the U.S. dollar, but also the New Zealand dollar and euro. The bank recommended selling Australian dollars into a rebound above $1.05.
Analysts say that since the euro zone and New Zealand economies are less dependent on China and geared more towards the United States, their currencies are likely to be less impacted than the Australian dollar.
The signs of Chinese slowdown have come as a pick-up in U.S. economic activity, along with the unwinding of QE3 expectations, have driven U.S. Treasury yields higher.
The gap between Australian and U.S. government bond yields has narrowed and could undermine one of the main factors that has supported the Australian dollar in the past few months.
"There are sufficient elements in the equation for the (Australian) currency to finally succumb to gravity," said Neal Mellor, currency strategist at Bank of New York Mellon. "A gradual move back towards parity in 2012 is our best guess."