Australia, NZ dollars underpinned by upbeat China manufacturing activity

[SYDNEY] The Australian and New Zealand dollars held firm on Tuesday as an unexpectedly upbeat survey of Chinese manufacturing activity and broad softness in their US counterpart augured well for Antipodean commodity exports.

The Aussie dollar made a two-month top of US$0.7827 before running into resistance. The next chart targets are US$0.7884 and US$0.7898, both peaks from October. The kiwi held at US$0.7102, just off last week's high at US$0.7124.

Helping sentiment was a Caixin survey of Chinese manufacturing which showed a surprise pick-up in activity in December even as Beijing pursued a crackdown on industrial pollution.

The news was taken as positive for continued Chinese demand for commodities, which has supported prices in recent months. Prices for iron ore, Australia's single biggest export earner, were holding above US$70 a tonne having been down around US$50 in mid-2017.

Likewise, copper climbed 31 per cent in 2017 to a four-year top, while aluminium amassed gains of 34 per cent. China is the world's largest consumer of industrial metals and accounts for nearly half of global copper demand.

Prices for coal and liquefied natural gas, two more major Australian exports, were also buoyed by Asian demand.

"In a year of continued, perhaps improving, synchronised global growth the Aussie should benefit," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

"A weaker, or stronger, US dollar also feeds into commodity prices which in turn feed into the Aussie."

Australian government bond futures eased a touch in the wake of the China news, with the three-year bond contract off 2.5 ticks at 97.815. The 10-year contract lost two ticks to 97.3200.

REUTERS