SYDNEY (Reuters) - The Australian dollar eked out a modest bounce on Tuesday as the prospect of more Chinese stimulus lifted key commodity prices and squeezed short positions in the beaten-down currency.
The Aussie dollar <AUD=D3> crawled up to $0.7086 and away from a 32-month trough of $0.7041, but faces immediate resistance around $0.7097.
Dealers said the bounce owed much to how short the market had become in the last couple of weeks as the Aussie fell from around $0.7300. Speculators' net short positions in the futures market stood at a net 71,718 contracts worth $5.2 billion.
The rally was helped by gains in Chinese iron ore and coal futures on expectations Beijing would ramp up infrastructure spending to aid the economy.
China must take strong stimulus measures to support growth at a "critical" period, the state-backed Global Times declared a in commentary on Tuesday.
Australian data was also upbeat with a survey showing businesses keen to hire as sales and profits remained strong.
The National Australia Bank's index of business conditions edged up 1 point to +15 in September, well above the long-run average, while the employment index hit +12.
"The NAB jobs measure is the third-highest reading since March 2006," noted Ryan Felsman, a senior economist at CommSec.
"Continued hiring, improving job security and wages growth are critical ingredients for consumers navigating rising cost of living pressures."
The New Zealand dollar <NZD=D3> was stuck at $0.6443, having managed only a minor bounce from Monday's $0.6424 low.
The prospect of Chinese stimulus tends to have a lot less impact on New Zealand's main commodity export, dairy, where prices have been slipping recently on expanding supply.
Domestic data did show government finances were in good shape should it need to use fiscal policies to support growth.
Revenues had been boosted by brisk annual growth of 2.8 percent in the second quarter, the fastest pace in two years.
New Zealand government bonds <0#NZTSY=> were little changed, as were Australian government bond futures.
The three-year bond contract <YTTc1> eased 1.5 ticks to 97.855, while the 10-year contract <YTCc1> held steady at 97.2100.
(Reporting by Wayne Cole; editing by Eric Meijer)
