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* Commodity currencies could see erosion of big gains since 2008
* Fund managers see falls in Australian, Canadian, NZ dlrs
* Some see Aussie as low as $0.95, CAD at C$1.05 in a year
By Jessica Mortimer
LONDON, May 7 (Reuters) - The Australian, Canadian and New Zealand dollars may be set for a decline, dragged down by a slowdown in China and a sharp fall in commodity prices.
Tuesday's 0.8 percent slide by the Aussie versus the U.S. dollar, prompted by a rate cut, was just a foretaste.
The Australian and New Zealand dollars are up 70 percent against the U.S. dollar since late 2008, driven up by near-zero rates in many developed countries. The euro zone crisis also led investors and central bank reserve managers to seek higher-yield, low-risk assets.
The Canadian dollar has gained around 30 percent.
Some analysts see all three currencies as overvalued, with worsening outlooks at home making rate cuts more likely.
The Reserve Bank of Australia cut rates on Tuesday to 2.75 percent and signalled more could come as a strong currency damages Australia's economy. Interest rates in New Zealand are 2.5 percent and in Canada 1 percent.
"We have underweight positions in these currencies," said Jonathan Davies, head of currency strategy at UBS Global Asset Management, speaking before the Australian rate cut.
While major developed economies suffered after Lehman Brothers collapsed in 2008, strong Chinese growth fuelled demand for commodities and sparked a boom in mining in Australia, dairy production in New Zealand and oil in Canada.
But Chinese growth has slowed this year and commodity prices have fallen, with gold down 8 percent since the start of 2013, copper down 5 percent and Brent crude down 2 percent. Australia is seen as particularly vulnerable because China is the main importer of its natural resources.
"The fundamental case for a weaker Australian dollar has been growing and it is a very compelling trade now to be underweight in Australian dollars," UBS's Davies said.
Falls in commodity-linked currencies have lagged a recent slide in commodity prices, suggesting the gap should close.
Indeed, charts show the correlation between the Australian dollar's performance and that of gold and copper has tightened in recent weeks. The Canadian dollar has also been more closely correlated with crude oil prices .
"A lot of the excitement about the Australian dollar was as a proxy - a proxy to China, a proxy to commodities, said Ken Dickson, investment director at Standard Life Investments. "But it's overvalued and China's growth strategy is in transition."
He holds a short Australian dollar position against the Mexican peso, whose growing manufacturing sector would benefit if China slowed while the U.S. economy improved, and favours short Canadian/U.S. dollar positions.
Dagmar Dvorak, director of fixed income and currencies at Baring Asset Management, said the Australian and Canadian dollars were "among the most overvalued currencies we look at".
Ian Stannard, currency strategist at Morgan Stanley expects commodity currencies to fall significantly in the second half of the year, "when we start to see the cracks appearing in China."
He saw the Australian dollar as most vulnerable and forecast it would hit $0.95 in 12 months.
The Australian dollar hit a 3 1/2-year low against the New Zealand dollar and a six-month low against the Canadian dollar after Tuesday's rate cut.
However, some analysts said bets on commodity currency falls were risky as China might yet escape a significant slowdown, while the trio's triple-A credit ratings and interest rates could attract central bank reserve managers for some time yet.