FOREX-Aussie, kiwi recover as commodities gain

* Aussie and kiwi recover from multi-month lows

* Oil, copper, iron ore prices all higher

* Euro, yen and sterling inch down

* Graphic: World FX rates in 2016

By Patrick Graham

LONDON, Dec 28 (Reuters) - The Australian and New Zealand dollars both recovered against their U.S. counterpart on Wednesday, helped by a broadly robust tone to stock and commodity markets heading into the final trading days of 2016.

In trade marked by the absence of most major investors and skeleton staffing in European bank dealing rooms, the yen, euro and pound were all marginally lower, pushing the index that measures the dollar’s broad strength 0.1 percent higher.

The Aussie and kiwi both fell to long-term lows last week, hit by concerns over Chinese growth and victims of the latest wave of dollar buying since the U.S. Federal Reserve’s policy meeting on Dec. 14.

Prices of the iron ore Australia exports to China have also weakened in the past month as expectations for Chinese growth eased but they are still double what they were 12 months ago. .IO62-CNO=MB

They rose 1.6 percent on Wednesday and the Aussie in turn was up 0.2 percent at $0.7202 in early trade in Europe. The kiwi gained half a percent to $0.6928.

While further gains for the dollar are one of the big consensus plays for major financial investors going into 2017, there have been signs of more doubt in recent weeks, with analysts beginning to wonder how much further appreciation a Donald Trump White House will tolerate.

“While the market collectively may not be focusing on the story, dollar strength could become a domestic political issue in 2017 should it persist,” said Simon Derrick, chief market strategist with BNY Mellon in London.

Trump’s concern over the rate of the Chinese yuan is well known, but Derrick also points to similar comments he made earlier this year on Japan’s drive to weaken the yen.

“Should the dollar make substantial gains from here, particularly against the yen, it will be interesting to see how president-elect Trump responds given his previous comment,” he said.

The dollar has gained 16 percent against the yen from lows hit on the night of Trump’s election. It gained another 0.15 percent to 117.61 yen on Wednesday after upbeat U.S. economic data reinforced expectations for economic growth under Trump’s administration and more rate hikes by the U.S. Federal Reserve next year.

“The next data to watch is U.S. payrolls due on Jan. 6,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo. “Markets are prepared for data showing a strong U.S. economy but not for the opposite.”

Sera added volatility could be high for the yen as Tokyo trading thins ahead of the Japanese New Year holiday, which lasts from Dec. 31 to Jan. 3. (Additional reporting by Yuzuha Oka in TOKYO; Editing by Janet Lawrence)