Australia, NZ dollars level off as doubts gather over Gulf ceasefire

SYDNEY, April 9 (Reuters) - The Australian and New Zealand dollars flatlined on Thursday as doubts about a lasting ceasefire in the Middle East restrained risk sentiment once again, though the kiwi drew some support from a hawkish shift in rate expectations at home.

The Aussie was sitting still at $0.7040 AUD=D3, having bounced almost 1.0% on Wednesday before topping out at $0.7084. There is more resistance up at $0.7124, while support comes in around $0.6960.

The kiwi dollar was a shade firmer at $0.5831 NZD=D3, after jumping 1.6% in the previous session to as high as $0.5859. Resistance remains at $0.5891, with support around $0.5778.

The kiwi also regained a little ground on the Aussie after weeks of losses, rising to A$0.8285 NZDAUD=R from a 13-year trough of A$0.8188.

That turnabout followed a hawkish shift by the Reserve Bank of New Zealand, which warned pre-emptive rate hikes may be needed if surging energy costs fed through to core inflation.

"To our mind, this constitutes more than central bank 'sabre-rattling'," said Andrew Ticehurst, an analyst at Nomura.

"The RBNZ appears to have lost some patience, and is clearly of a view that rates will need to rise, with the only question being one of timing."

Markets imply around a 30% chance that the RBNZ will lift its 2.25% cash rate by 25 basis points in May, rising to an 86% probability by July. The rate is now seen as likely to reach 3.0% by year-end. 0#NZDIRPR.

Two-year swap rates spiked 15 basis points in response, to 3.4655% NZDSM3NB2Y=.

Ticehurst also said the market had got very short of New Zealand dollars during the currency's decline in recent weeks. He expects the kiwi to rise to $0.6120 by the end of June.

The Reserve Bank of Australia has already raised rates twice this year to 4.10% with inflation stuck stubbornly above its target range of 2% to 3% well before the conflict started.

Markets imply a 60% chance of another quarter-point rise in May, and see rates at 4.65% by year-end. 0#AUDIRPR