WELLINGTON (Dow Jones)--The New Zealand dollar was trading slightly lower Tuesday, dragged a down by moves in the Australian dollar following the Reserve Bank of Australia's surprise decision to increase the cash rate. The RBA surprised financial markets when it tightened policy for the first time in six months late Tuesday, increasing the cash rate to 4.75%, in a pre-emptive strike to stave off looming inflation pressures being fuelled by a once-in-a-century mining boom. HIFX senior trader Stuart Ive said weakness in the Australian dollar following the decision weighed slightly on the Kiwi-U.S. dollar rate, but it had made more of impact on the New Zealand-Australian dollar rate. He noted that the cross rate has returned to the band it was trading in prior to the Reserve Bank of New Zealand's decision last Thursday to hold its rate steady as the RBA's decision had investors repositioning themselves against the Australian dollar. He added that the focus was now on the Federal Reserve's policy meeting that ends Wednesday and what decision there would be about a widely expected quantitative easing programme. "There is bound to be more rumour, and speculation about tonight" to influence the U.S. dollar, he added. New Zealand government bonds closed unchanged, while interest swap rates fell, but a local bond trader said Tuesday's movements were academic following the Reserve Bank of Australia's decision to increase the cash rate as yields had rallied five points across the curve in after-hours trading on Tuesday. -By Lucy Craymer, Dow Jones Newswires; 64-4-471-5990; lucy.craymer@dowjones.com

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