SYDNEY: The Australian and New Zealand dollars were under pressure on Tuesday on concerns the spread of COVID-19 cases in China would hamper global growth and the demand for commodities.

The Aussie slipped 0.2% to $0.6791 and away from a three-week top of $0.6829 touched on Monday.

Support comes in around $0.6740 with major resistance at the 200-day moving average at 0.6856.

The kiwi dollar eased to $0.6305 and away from last week’s top of $0.6372, though it should have strong chart support down at $0.6231.

A batch of surveys showed activity in China’s manufacturing and service sectors contracted in December with shipments badly affected.

“The sudden 180-degree turn of ending zero-Covid policies has led to sweeping Covid infections across the country since early December, with mobility, shipment and business activity abruptly disrupted,” wrote analysts at Nomura in a note.

“We have lowered our Q4 GDP growth forecast to 1.5% y-o-y from our already below-consensus forecast of 2.4%.”

Australia, New Zealand dollars fly high after soft US CPI

China is Australia’s single biggest export market and a setter of prices for many of its commodities, notably iron ore. The risks were highlighted by Australian Treasurer Jim Chalmers in a radio interview.

“This is one of the main things that will influence our economy in 2023, China’s management of COVID and this really quite extraordinarily large wave that they’ve got there at the moment is a big thing,” he warned.

Domestic data was not much better as Australian home prices slid for an eighth straight month in December to notch the largest annual decline since 2008.

Past housing slumps have tended to take a heavy toll on consumer spending over time and is one reason why the Reserve Bank of Australia (RBA) has flagged the chance of a pause in its aggressive tightening campaign.

Markets are currently split on whether the RBA will hike the 3.1% cash rate at its next policy meeting on Feb. 7, but still have a peak of 3.85% priced in for later in the year.