By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Jan 18 (Reuters) - The Australian dollar pulled away from seven-year lows on Monday as some investors were keen to buy what they perceived to be bargain levels, but persistent concerns about global growth kept gains in check.
The Australian dollar AUD=D4 edged up nearly half a cent to $0.6906, from $0.6860 late on Friday. It was underpinned by some bargain hunting after it touched a seven-year trough of $0.6827 on Friday. Resistance was found at $0.6915 and support at $0.6830.
The Aussie also bounced 0.7 percent higher to 80.94 yen AUDJPY=R , pulling away from 2-1/2-year lows touched last week against the safe-haven yen.
A small recovery in iron ore, Australia's top export earner, to above $40 a tonne .IO62-CNI=SI helped lend support. The mineral has shed 40 percent in the past 12 months, having dropped to $37 in December, the lowest recorded by The Steel Index (TSI) which began in 2008.
Still, the Aussie's outlook remained shaky.
"Sentiment, rather than fundamentals, remains in control of markets and this keeps downside risks open," said ANZ in a note, adding that China was again going to take centre stage this week with a batch of economic data. ECONCN
China is Australia's top export market.
Worries about falling commodity prices, market volatility and China's growth have encouraged markets to increase the chances of an interest rate cut in Australia.
Interbank futures 0#YIB: imply an 80 percent chance of a rate cut by May, up from around 50-50 percent last week.
The New Zealand dollar NZD=D4 held steady at $0.6463, from a three-month low of $0.6382 set on Friday. BNZ FX Strategist Jason Wong noted the November support level of $0.6430 remains a key technical level but "we think that it is only a matter of time before a more sustainable break of that support occurs, which will see the NZD fall a lot further this year."
Both Antipodeans have shed around 5 percent so far this year.
New Zealand government bonds 0#NZTSY= gained, sending yields around 4.5 basis points lower across most of the curve.
Australian government bond futures jumped to two-month highs, with the three-year bond contract YTTc1 up 5 ticks at 98.130. The 10-year contract YTCc1 rose 2 ticks to 97.3300, while the 20-year contract YXXc1 added 1.5 ticks to 96.8350. (Editing by Jacqueline Wong)