Australian and NZ dlrs dogged by China worries; RBNZ in focus

* Aussie & kiwi dollars under a bit of pressure

* China worries hit commodity prices, copper down hard

* RBNZ expected to raise rates on Thursday

By Ian Chua and Naomi Tajitsu

SYDNEY/WELLINGTON, March 12 (Reuters) - Worries about a slowdown in China kept the Australian and New Zealand dollars pinned down on Wednesday, although prospects of an imminent interest rate hike in New Zealand limited the losses.

Talk of foreign demand for Australia's new 2026 government bond, which is being launched on Wednesday, supported the Aussie, which slipped a modest 0.1 percent to $0.8961 AUD=D4 . The kiwi was 0.1 percent lower as well at $0.8459 NZD=D4 .

Both currencies were softer against the euro and yen. The euro climbed 0.2 percent to A$1.5456 EURAUD=R and was 0.1 percent higher at NZ$1.6373 EURNZD=R .

The Aussie slipped 0.1 percent to 92.30 yen AUDJPY=R , and the kiwi edged down 0.1 percent to 87.13 yen NZDJPY=R .

Recent data have inflamed fears about the health of the Chinese economy, the biggest trading partner of both Australia and New Zealand. Reflecting that, copper CMCU3 and iron ore

.IO62-CNI=SI prices have fallen steeply to multi-month lows.

Yet, the Antipodean currencies have got off relatively lightly so far. The kiwi is down only 0.8 percent from Friday's 4-1/2 month peak of $0.8523, while the Aussie has slipped 2 percent from a near three-month high of $0.9135.

Keeping kiwi bears at bay are expectations the Reserve Bank of New Zealand (RBNZ) will lift interest rates on Thursday as it tries to quell inflation pressures. News Search ID:nL6N0M705U

Markets are fully priced for a 25 basis-point rise in the official cash rate to 2.75 percent CSS7 , and many economists expect three more rate rises this year. News Search ID:nL6N0M705U

As such, the focus is on any guidance from the RBNZ on how far its sees rates rising in the tightening cycle. Any signs that it may move more than expected could propel the kiwi to 10-month highs above last October's peak of $0.8544.

But some analysts see a risk that the kiwi may struggle once the market turns its attention back to global risks, saying concerns about a slowdown in China economy and tensions in the Ukraine could drive the currency down towards $0.8300.

"Over the next week, and post-RBNZ, the kiwi will start following international events, and at the moment, they suggest that the kiwi needs to go down a little bit," said Sam Tuck, currency strategist at ANZ in Auckland.

New Zealand government bonds 0#NZTSY= rose slightly, nudging the benchmark 2023 yield 2.5 basis points lower.

Australian bond futures were mixed with the three-year contracts YTTc1 up half a tick at 97.020, while the 10-year contracts eased 1.5 ticks to 95.860.

The underperformance of the 10-year sector was attributed to the new 2026 benchmark bond sale.

Market chatter is that the issue size will be a record $7 billion, but pricing details are yet to be released. The issue is being managed by Citi, Deutsche Bank, UBS and Westpac.

(Editing by John Mair)

((ian.chua@thomsonreuters.com)(+61 2 9373 1871)(RM: ian.chua.thomsonreuters.com@reuters.net))

Keywords: MARKETS AUSTRALIA/FOREX