THE Australian dollar jumped more than half a cent to US105.45¢ on Thursday afternoon after a surge in China's trade raised hopes that Asia's powerhouse economy was recovering faster than expected.
The dollar hit its highest level in weeks as official figures showed Australia had benefited from a surge in shipments of commodities to our biggest trading partner in the final month of 2012.
With iron ore prices also taking off this week, analysts said China's revival suggested the Reserve Bank would leave the cash rate on hold at 3 per cent next month.
In a positive sign for the world's second largest economy, the figures showed a 14.1 per cent jump in exports in the year to December, up from just 2.9 per cent in November, exceeding most analysts' forecasts.
Chinese imports were up 6.1 per cent in the year - including a 7 per cent jump in imports from Australia - suggesting solid domestic demand.
The global co-head of currency strategy at NAB, Ray Attrill, said investors had piled into the Aussie dollar after the strong trade figures.
"It's taken off like a rocket," he said. "The China trade numbers have punched the lights out in relation to what economists' expectations were in all respects."
Significantly for Australia, China's iron ore imports were up 10.7 per cent in the year to December. "It seems to suggest that the Chinese growth engine has revved up towards the end of last year," Mr Attrill said.
While the trade numbers are the latest sign of stronger activity in China, the news on Australia's construction industry was less positive.
The number of building approvals granted for private-sector houses - which points to future activity in construction - fell 0.3 per cent in November, the Bureau of Statistics said.