SYDNEY, April 13 (Reuters) - The New Zealand dollar firmed on Wednesday after the country's central bank raised interest rates by an aggressive 50 basis points, though it tempered that a little by not lifting its projected peak for rates.
The market had been wagering heavily on a half-percentage-point move from the Reserve Bank of New Zealand (RBNZ), though a majority of economists had looked for just a quarter point. The central bank had not raised rates by half a percentage point since May 2000.
In reaction, the kiwi rose 0.3% to $0.6868 but remained well short of its recent five-month high of $0.7034. Support comes in at $0.6808, with resistance at $0.6906.
The Australian dollar also edged up, to $0.7467, on speculation the sharp move by the RBNZ would increase pressure for a tightening from the Reserve Bank of Australia.
This was the fourth hike by the RBNZ in the current cycle and took the policy rate to 1.5%, with the central bank arguing that faster moves now would lessen the risk of inflation getting out of hand in the future.
That saw investors price in another half-point hike for the May policy meeting and a rate of 3.25% by year-end.
"Given that we expect wage growth and inflation to rise further in the months ahead and the labour market to remain tight, the RBNZ still has a lot of work ahead of itself," said Ben Udy, an economist at Capital Economics.
"We have pencilled in 6 more rate hikes this year, which would mark one hike at every meeting along with another 50 basis points in May," he added. "That would take rates to 3.0% by the end of this year."
However, the RBNZ was also content to keep its previously projected peak for rates at 3.35% - not lifting it to 3.5% or higher, as some hawks in the market had bet on.
As a result, two-year swap rates actually eased 7 basis points to 3.56% as the market trimmed back some of its future tightening expectations.
Yields on 10-year bonds also came off 6 basis points to 3.515%. (Reporting by Wayne Cole; Editing by Bradley Perrett)
