SYDNEY/WELLINGTON: The Australian dollar extended recent gains on Thursday after China trade data far-exceeded expectations, helping offset the drag from a soft jobs report at home.
The Aussie leapt half a cent to a one-week high of $0.9055 after China's exports in July rose 5.1 percent from a year earlier, while imports jumped 10.9 percent.
Chinese imports from Australia rose 25 percent in July, the fastest pace of annual growth in over a year.
The report alleviated fears of a sharp slowdown in the Asian giant, Australia's key export market, and leaves the Aussie with a gain of 1.7 percent so far this week. If sustained, it would be the largest rise in more than a year.
Analysts said the currency's outperformance is largely due to positioning as markets have been heavily short the Aussie.
David Scutt, a trader at Arab Bank Australia, sees room for further appreciation for the currency.
"With no major data or events ahead, markets will leave the Fed tapering (talk) for now and look for excuses to take the Aussie higher," he said, seeing the Aussie as high as 93 cents.
"Lots of people are short," he said.
Immediate resistance was found at $0.9108. The Aussie also surged against the yen to 87.63 yen, well away from a nine-month trough hit this week.
Earlier in the day, data showed Australian employment fell 10,200 in July in a blow to expectations for a small rise, though unemployment remained steady at 5.7 percent when analysts had looked for a tick higher.
The mixed report did little to alter market expectations of further easing with interbank futures <0#YIB:> still pricing in a move to 2.25 percent by Christmas. A cut at the next RBA meeting on Sept. 3 is considered highly unlikely because it would come just a few days before the Federal election.
For now, the market is pricing in around an 80 percent chance of a cut to 2.25 percent in November, while it is fully factored in for December.
The outlook for policy could be clearer on Friday after the RBA releases its quarterly assessment of the economy. Analysts see risks it might trim forecasts for economic growth while nudging up estimates for inflation.
The New Zealand dollar was sidelined at $0.7958 where it started the session. Support was seen close to the 50-day moving average at $0.7900 and resistance at $0.8000.
"The New Zealand dollar's back on the block, after shaking off the negatives of Fonterra's dairy scare. Barring a surprise, expect it to trade in a broad 79 to 80 cent range," said a trader at a local investment bank.
The market was unmoved by data showing house prices at a record level for a 10th consecutive month. The government agency producing the numbers suggested tighter bank lending policies might be weighing on sales.
New Zealand government bond prices had a hint of a bid tone, which sent yields half a tick lower along the curve.
Australian government bond futures were little changed. The three-year bond contract was flat at 97.480 and the 10-year contract added 1 tick to 96.315.
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