New Zealand dollar firms as RBNZ rate cut draws rare dissent

By Wayne Cole

SYDNEY, May 28 (Reuters) - The New Zealand dollar edged up on Wednesday after the country's central bank cut interest rates as expected but revealed a rare vote against the move, while Australian price data leant against another cut in the very near term.

The Reserve Bank of New Zealand trimmed its cash rate by 25 basis points to 3.25%, the lowest since September 2022 and bringing the easing cycle to a chunky 225 basis points.

Minutes of the meeting showed the bank debated cutting or holding steady and one member voted for the latter citing uncertainties caused by U.S. tariffs.

That led markets to slightly pare back the chance of a further cut at the next meeting in July, and pushed two-year swap rates NZDSM3NB2Y= 6 basis points higher to 3.185%.

Still, the bank now projected rates would bottom around 2.85%, compared to 3.1% seen back in February.

Markets were already wagering rates would go to 2.75% or 3.0% given the domestic economy was in recession and the global outlook was threatened by a potential trade war. 0#NZDIRPR

That limited the reaction and the kiwi dollar inched up 0.1% to $0.5959 NZD=D3, after slipping 0.8% on Tuesday. Resistance is at the recent seven-month high of $0.6031, while support lies at $0.5940 and $0.5850.

The Aussie was flat at $0.6445 AUD=D3, having fallen 0.7% overnight as its U.S. counterpart rallied. The pullback from a six-month top of $0.6537 puts the focus on support around $0.6400 and $0.6358.

Australian data showed consumer prices rose an annual 2.4% in April, just above forecasts of 2.3%, partly due to big rises in holiday and insurance costs. Core inflation was also slightly above expectations at 2.8%.

This could be somewhat disappointing for the Reserve Bank of Australia which cut rates by a quarter of a point to 3.85% last week largely on confidence inflation would continue to slow.

Analysts cautioned that the data was a partial snapshot of the full CPI and a true reading would come only in the second quarter report due in late July.

That might argue against an easing at the RBA's next meeting on July 8. 0#AUDIRPR

"There are reasons to take the monthly CPI indicator with a pinch of salt, but with underlying price pressures proving somewhat persistent, we don't think the RBA will cut rates as far as markets are anticipating," said Abhijit Surya, a senior APAC economist at Capital Economics.