By Naomi Tajitsu and Cecile Lefort
SYDNEY/WELLINGTON, Oct 24 (Reuters) - The Australian and New Zealand dollars were nursing losses on Thursday as concerns about China's economic strength crept back in focus with markets awaiting a preliminary private survey on Chinese manufacturing activity.
The Aussie found a tentative footing at $0.9638, having fallen 1.4 percent from a 4-1/2-month peak of $0.9758 on Wednesday. It was harder hit against the safe-haven yen, skidding nearly 2 percent to a trough of 93.39.
Support for the Aussie was seen at the 10-day moving average of $0.9595, with resistance around $0.9665.
Risk assets came under pressure in the previous session following a spike in short-term money market rates in China as fears grew the central bank may tighten the cash supply to counter inflation risks and curb shadow banking.
The Aussie and kiwi suffered the most as investors had been recently piling on long positions.
The Antipodean currencies are very sensitive to news out of the Asian giant, a key export market to both Australia and New Zealand.
Markets are now awaiting the HSBC Flash China PMI data at 0145 GMT with traders also keeping a close eye on short-term China rates and Asian equity markets.
'If the reading is strong, the Aussie may gain 30 pips but if it's weak, there is far more downside risk and it could easily dip 70 pips,' said a trader at a European bank in Singapore.
He is surprised that the Aussie has been able to climb to current levels given the relatively soft Australian fundamentals, and forecast the currency to fall to 93 cents. The Aussie has climbed 8 cents since August lows.
The New Zealand dollar traded around $0.8415, finding its footing after stumbling 1.4 percent the previous day to a one-week low of $0.8358.
It stood at 82.00 yen, not far from a trough around 81.30 yen hit on Wednesday, when it tumbled more than 2 percent to suffer its worst daily performance against the safe-haven yen since June.
Traders said the kiwi was hit hard on Wednesday after selling by real money names in Asia was compounded by speculation that China may be facing another liquidity squeeze.
A weaker reading on Chinese manufacturing and any further stress in money markets in the Asian economic powerhouse could trigger more losses in the high-yielding Antipodean currencies, they said. The Aussie and kiwi have rallied as much as around 10 percent against the U.S. dollar since September.
'If the Chinese money market continues to show signs of stress and if we get a Chinese PMI reading below 50, it's just going to raise concerns about the Asian region,' said Sam Tuck, currency strategist at ANZ in Auckland
'We've had quite a run up until now, we can give back a couple of cents in the kiwi and the Aussie,' he said, adding that demand for the kiwi was likely to emerge towards $0.8200, limiting any further losses.
New Zealand government bonds edged up, nudging yields a basis point lower along the yield curve.
Australian government bond futures were softer with the three-year bond contract down 1 tick to 96.950. The 10-year contract also lost 1 tick to 96.040.
Keywords: MARKETS AUSTRALIA/FOREX
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