The Australian dollar popped higher against the US dollar on Thursday, after strong Chinese trade data boded well for commodity prices.
Beijing reported exports in December jumped 14.1 per cent, from a year earlier, far outstripping forecasts of a 4 per cent increase. Imports were up 6 per cent, handily beating market forecasts for a 3 per cent rise and quickening from zero growth in November.
The upbeat reading is good news for Australia as China is Australia's top export market as well as a key driver of prices for commodities.
"With iron ore prices at $US158.50 a tonne and Chinese trade balance looking good, it's saying that things are picking up in China and that supports the Aussie dollar," said Matthew Johnson, a rate strategist at UBS.
The Australian dollar jumped around half a cent on the data to a three-week peak of $US1.0554 after hovering below $US1.05. It last changed hands at $US1.0545, showing a gain of 1 per cent so far this week.
An economic recovery in China also lessens the urgency for further cuts in Australian interest rates after the Reserve Bank of Australia (RBA) eased last year by 125 basis points to a record-matching low rate of 3 per cent.
Swap markets have pared back the probability of a cut at the next RBA meeting in February to a one-in-three chance from around 40 per cent.
For Johnson, a quarter-point easing in February remains a possibility and sees the Aussie testing $US1.0600 during the offshore session, its highest since September.
For now, immediate resistance is seen at $US1.0585, the December peak, with charts suggesting further upside. Support is found at around $US1.0500.
Also underpinning the Aussie is ongoing strength in prices for iron ore, a major Australian export, which hit a 15-month high this week.
The dollar kept the upper hand against the yen and euro. It scaled fresh four-year peaks versus a floundering Japanese currency which has been battered by expectations that Tokyo will implement more yen-weakening monetary easing to salvage the economy.
The Aussie powered up above 93 yen for the first time in more than four-and-a-half years, showing a 0.7 per cent gain on the day. It was also buying 80.88 euro cents.
Data out in Australia showed building approvals rose 2.9 per cent in November, continuing a slow recovery. The series is volatile and has swung wildly in recent months, in part due the timing of some very large apartment towers.
Government bond futures slipped, getting closer to multi-month lows hit last week. The three-year bond contract eased 0.05 points to 97.170, while the 10-year contract lost 0.045 points to 96.575.