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ASX 200 hits highest level since Sept 15

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Financials top gainers in benchmark index

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RBNZ hikes rates by 50 bps

Oct 5 (Reuters) - Australian shares climbed to their highest levels in nearly three weeks on Wednesday, with banks leading gains, as investors found comfort in the central bank's smaller-than-expected interest rate hike.

The S&P/ASX 200 index closed 1.7% higher at 6,815.70, with major sub-indexes ending in black. The benchmark closed 3.8% higher on Tuesday.

Market sentiment was boosted as the Reserve Bank of Australia (RBA) slowed its pace of raising rates on Tuesday, saying they had already risen substantially, although it added that further tightening would still be needed.

"The RBA's undersized 25bp hike came as a huge relief for equity traders, and hopes that the Fed (U.S. Federal Reserve) could be nearing a pivot of their own ... have provided another leg higher for the ASX 200," said Matt Simpson, senior market analyst at City Index.

Financials gained 2.3% to hit a three-week high, with the country's four largest banks advancing between 2.1% and 3.4%.

Miners rose 1.3% to notch their highest level since Sept. 13. The mining trio BHP Group, Rio Tinto and Fortescue Metals Group added between 1.1% and 2.4%.

Rate-sensitive technology stocks surged 3.9% and tracked an overnight rally among their Wall Street peers. ASX-listed shares of Block and WiseTech Global rose 7.5% and 5.7%, respectively.

Link Administration climbed 6.7% and was among the top gainers in the benchmark index after the share registry firm received a A$1.27 billion ($823.47 million) bid from Canada's Dye & Durham for its corporate markets and banking segments.

In New Zealand, the benchmark S&P/NZX 50 closed 0.8% higher at 11,180.01. The country's central bank raised interest rates by 50 bps to a seven-year high of 3.5% and flagged more to come as it struggles to contain stubbornly high inflation.

"Today's statement provided little indication of the RBNZ (Reserve Bank of New Zealand) being ready to slow the pace of rate hikes yet," said Gordon Scott, an economist at RBC Capital Markets in a note.

Scott forecast a final 50 bps hike at the central bank's meeting next month.

($1 = 1.5423 Australian dollars) (Reporting by Upasana Singh in Bengaluru; Editing by Sherry Jacob-Phillips)