NZ dollar soars as data raises chance of Jan rate hike

* NZ inflation higher than forecast in Q4

* Markets see 50-50 chance of rate hike next week by RBNZ

* Aussie remains near 3-1/2-yr lows vs USD

By Gyles Beckford and Cecile Lefort

SYDNEY/WELLINGTON, Jan 21 (Reuters) - The New Zealand dollar jumped on Tuesday after an unexpected rise in inflation stoked speculation that interest rates could rise as soon as next week.

In contrast, the Australian dollar was subdued at $0.8817

AUD=D4 a day after hitting its lowest in 3-1/2-years. Support is seen at $0.8780, with immediate resistance near $0.8824.

The kiwi NZD=D4 shot up over half a cent to $0.8332 after data showed consumer prices rose 0.1 percent last quarter, confounding forecasts for a 0.1 percent fall. News Search ID:nL3N0KU195

The outcome added to the case for the Reserve Bank of New Zealand (RBNZ) to lift rates at its policy review on Jan. 30.

"Yesterday we would have said there was a low chance of January being the start date, today the chances are considerably higher," said Westpac senior strategist Imre Speizer.

Bond futures 0#NBB: fell as much as 9 ticks while swap markets CSSY sharply narrowed the odds of a tightening, implying a 50-50 chance of a move from a record low of 2.5 percent. They had priced in one-in-four chance before the data.

"I expect this rise will be sustained over the next 24 hours and the offshore markets will react in the same way and further," added Speizer.

New Zealand government bonds 0#NZTSY= slipped, sending yields up as much as 5 basis points along the curve.

Near term support for the kiwi was seen at $0.8275, with offers likely to emerge towards $0.8400.

A recent Reuters poll showed 14 of 17 economists expect a rate rise in the first quarter of this year, a move that would make New Zealand the first developed economy to tighten in the current cycle. NZ/POLL

The RBNZ signaled last year it was likely to start raising rates by the middle of this year, as a strongly performing economy ramps up inflation pressures. It said the speed and extent of rate rises would depend on the impact of higher house prices and construction costs.

The increasingly diverging interest rate outlook between New Zealand and Australia weighed on the Aussie currency against its neighbour. The Aussie pulled closer to 8-year lows to last trade at $1.0575 AUDNZD=R .

The Aussie has been pressured across the board after a disappointing job report last week revived speculation about another cut in interest rates by the Reserve Bank of Australia (RBA).

Interbank futures 0#YIB: imply around a 50-50 chance of an easing to 2.25 percent by the middle of the year.

Australian government bond futures pulled back from multi-month highs with the three-year bond contract YTTc1 down 3 ticks at 97.110. The 10-year contract lost 2.5 ticks to 95.950.

(Editing by Shri Navaratnam)

((Cecile.Lefort@thomsonreuters.com)(+61 2 9373-1234)(Reuters Messaging: cecile.lefort.thomsonreuters@reuters.net))

Keywords: MARKETS AUSTRALIA/FOREX