New Zealand dollar up as RBNZ signals near done on rate cuts

By Wayne Cole

SYDNEY, May 28 (Reuters) - The New Zealand dollar bounced on Wednesday after the country's central bank cut interest rates as expected but signalled it might be nearer to an end on easing than some in the market had hoped for.

The Reserve Bank of New Zealand trimmed its cash rate by 25 basis points to 3.25%, though one member took the rare step of voting against the move and for staying on hold.

Speaking to the media, RBNZ Governor Christian Hawkesby repeatedly emphasised that the central bank had already cut by a large 225 basis points and that all this stimulus would take time to feed through to the economy.

With rates now in a neutral zone around 3.0%, there was more scope to consider policy meeting by meeting, he added.

The RBNZ did project a floor for rates at 2.85%, but further out than many had bet on. 0#NZDIRPR

"Short end rates and the Kiwi rose as markets contemplated the gradual decline in the RBNZ's rate track, which raises the possibility of a pause in the near future," noted analysts at Citi.

Markets scaled back the chance of an easing at the next meeting in July to around 36%, from 60% previously. Two-year swap rates NZDSM3NB2Y= jumped 11 basis points to 3.230% as dovish positions were squeezed out.

The kiwi dollar rose 0.4% to $0.5975 NZD=D3, after slipping 0.8% on Tuesday. Resistance is at the recent seven-month high of $0.6031, with support 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 that 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 as soon as the RBA's next meeting on July 8. 0#AUDIRPR