Australian and NZ dollars show resilience to Chinese worries

* Pending govt benchmark issue, recent upbeat data support AUD

* Kiwi holds near 4-1/2-month peak vs USD

By Cecile Lefort and Naomi Tajitsu

SYDNEY/WELLINGTON, March 11 (Reuters) - The Australian and New Zealand dollars showed noticeable resilience on Tuesday after worries about China's economy hit commodity prices hard.

The Aussie AUD=D4 held steady at $0.9027, from $0.9016 in early trade, having touched a three-month high of $0.9135 late last week. It lost some altitude after a sharp fall in China's exports in February cast a shadow over the global outlook.

The Australian dollar is seen as a proxy of Chinese growth because of the countries' strong trade links. China is Australia's top export market.

Still, the Aussie is up 1 percent so far this month supported by a run of stronger-than-expected data at home.

The Aussie's strength, however, will not please the Reserve Bank of Australia, which has long favoured a lower currency to help support the economy.

The RBA kept rates at a record low of 2.5 percent at its policy meeting last week, saying the most prudent course was likely a period of stability.

Economists expect the central bank to hold rates steady this year with interbank futures 0#YBA: implying a less than one-in-10 chance of any further cuts in rates. Swap markets give a 50-50 chance of a hike on a 12-month horizon.

"We had a lot of good data last week and markets are confident that yields won't fall too far," said Sean Callow, a senior strategist at Westpac.

He said the Aussie is likely to find some support from a benchmark Australian government bond issue to price Wednesday with settlement on 19 March. Initial talk of the 2026 offer suggests a minimum size of A$2 billion with a yield around 4.35 percent.

Foreign investors hold about three-quarters of Australia's A$300 billion outstanding debt.

A private survey showed a drop in Australian business conditions and confidence last month even though firms surveyed remained relatively upbeat on the outlook for the economy.

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The next flash point on the home front is labour data on Thursday, with 18,000 jobs expected to have been added in February. ECONAU

Support for the Aussie is seen around $0.9000, then $0.8985 with resistance at $0.9070.

The New Zealand dollar edged up to 79.45 versus a currency basket =NZD , its highest since the kiwi was floated in 1985, amid widespread expectations the Reserve Bank of New Zealand will raise rates by a quarter point to 2.75 percent on Thursday.

The RBNZ has already suggested that rates may rise to around 4.75 percent over the next two years.

"A higher projection than +100 basis points for 2014 and 2015 will fan the NZD even further," analysts at TD Securities said in a note.

The kiwi NZD=D4 held at $0.8467, not far from a 4-1/2-month high of $0.8523 hit late last week and within sight of the October peak of $0.8544.

It rose to a one-week high versus the Aussie AUDNZD=R at NZ$1.0630, and to a near two-month high of NZ$1.9617 versus sterling GBPNZD=R , which struggled after the Bank of England talked down its currency.

New Zealand government bonds 0#NZTSY= edged up, pushing most yields 2 basis points lower.

Australian government bond futures were a fraction firmer with the three-year bond contract YTTc1 up 2 ticks at 97.010. The 10-year contract added 1 tick to 95.860.

(Editing by Chris Gallagher)

((Cecile.Lefort@thomsonreuters.com)(+61 2 9373-1234)(Reuters Messaging: cecile.lefort.thomsonreuters@reuters.net))

Keywords: MARKETS AUSTRALIA/FOREX