* Aussie sheds a cent after surprise RBA rate pause * Market sees a 1-in-3 chance of a November hike * Kiwi slips then recovers, gains on A$ cross By Adrian Bathgate and Koh Gui Qing SYDNEY/WELLINGTON, Oct 5 (Reuters) - The Australian dollar plunged nearly a cent on Tuesday after the Reserve Bank of Australia surprised investors by skipping a chance to raise rates even though it said more tightening was on the cards. The Australian dollar fell as far as $0.9565 and was hammered the most against the New Zealand dollar after the RBA left rates unchanged at 4.5 percent. That confounded the market's bet on a 75 percent chance of rates rising to 4.75 percent. The Aussie dollar's plunge was accentuated by stop-loss selling below $0.9626, but it quickly found its feet on speculation the RBA would hold true to its hawkish stance by hiking in November, after third-quarter inflation data is out. "The RBA does not like to have a strong hawkish bias for an extended period without acting," said George Tharenou, an economist at UBS. "We put today's on-hold decision down to timing, and still expect a rate hike before year-end, most likely in November." Indeed, the market still sees a one-in-three chance of rates rising to 4.75 percent next month, but was no doubt less hawkish than before having just been burnt by the RBA. The November interbank contract <0#YIB:> jumped 0.175 points to 95.42, its largest daily move in absolute terms in five months. December bill futures <0#YBA:> surged 0.19 points while three-year bond futures rallied 0.10 points. The cash yield curve <0#AUBMK=> steepened dramatically to 21 basis points, from a two-year low of 12.4 basis points seen on Monday. Swap rates plummeted across the curve, with one-year rates dropping to 4.9825 percent, down sharply from a two-year peak of 5.2025. Against other currencies, the Aussie dollar took the biggest hit against the kiwi dollar by skidding as far as NZ$1.2934 , way below NZ1.3112 seen before the RBA announcement. Even bold policy easing from the Bank of Japan did not manage to support the Aussie dollar on the yen. It fell to 80.23 yen , from Monday's 80.84. But some analysts said Tuesday's sell-off aside, the Aussie dollar was still a solid buy, even at present lofty levels. "Any temporary pull-back in Australian dollar is exactly that. We do expect interest rates to go higher," said Stephen Roberts, an economist at Nomura. Roberts said he expected the currency to hit parity on the U.S. dollar in 2011 and hold above $1.00 for years. For a column on how the currency could rise beyond $1.00, click on [ID:nSGE68N04X] The New Zealand dollar also also took a brief hit from the RBA decision, but soon recovered to its prior levels around $0.7385. The kiwi had been about $0.7413 but was knocked slightly lower after a closely watched business sentiment survey fell to its lowest in more than a year. [ID:nSGE692025] The survey was seen consistent with other weak reading of the economy, and was seen prompting the central bank to keep interest rates on hold until early 2011. [NZ/POLL] However the kiwi was seen well supported from about $0.7360, limiting the losses from the double-blow of bad news. "Domestic fundamentals argue for a weaker New Zealand dollar, but the spectre of Federal Reserve quantitative easing is a powerful U.S. dollar-negative, leaving kiwi direction at the mercy of global risk sentiment," analysts at Westpac said in a note to clients.

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