SYDNEY: The New Zealand dollar held firm 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.

While a majority of economists had looked for a rise of just a quarter percentage point from the Reserve Bank of New Zealand (RBNZ), the market had wagered heavily on a half point. That limited the reaction.

The kiwi edged up 0.1% to $0.6855 and remained well short of its recent five-month high of $0.7034. Support comes in at $0.6808, with resistance at $0.6906.

This was the fourth hike by the RBNZ in the current cycle and took the cash 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 a chance of around 75% for another half-point hike for the May policy meeting and a rate of at least 3.0% 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.

As a result, two-year swap rates actually eased 17 basis points to 3.46% as the market trimmed back some of its future tightening expectations.

Yields on 10-year bonds also came off 9 basis points to 3.48%.

The Australian dollar edged up to $0.7467 on speculation the sharp move by the RBNZ would increase pressure for an early increase in the Reserve Bank of Australia’s 0.1% cash rate.

Futures are fully priced for an Australian hike to 0.25% in June, and imply around a one-in-four chance of an increase to 0.5%.

Again, markets assume a series of rapid-fire moves taking rates to 2.0% by the end of the year.