Dollar handles Fed with poise; kiwi ruffled by RBNZ

By Ian Chua

SYDNEY (Reuters) - The U.S. dollar turned mixed on Thursday after the Federal Reserve offered little in the way of surprises, in contrast to New Zealand's central bank, which flung open the doors to a cut in rates and clipped the kiwi in the process.

The dollar index stood at 98.940, after easing 0.4 percent on Wednesday. A firmer euro, which reached a one-week high of $1.0918 , was the main drag on the index.

The greenback managed to gain on the yen, rising as far as 119.08 . It has since stepped back to 118.66 yen.

The Fed kept interest rates unchanged as expected and said it was "closely monitoring" global economic and financial developments. It said the U.S. economy was still on track for moderate growth and a stronger labour market even with "gradual" rate increases.

"Overall, the statement reflects the caution that one would expect a central bank to use in the current volatile environment. But the Fed hasn't deviated from its previous message, with future moves in rates remaining in the hands of the incoming data," analysts at ANZ wrote in a note to clients.

Mirroring the Fed's concerns, the Reserve Bank of New Zealand (RBNZ) said uncertainty about the strength of the global economy has increased, noting weaker growth in the developing world, particularly China.

While the RBNZ also kept rates steady, at 2.5 percent, it said further easing may now be required, an abrupt turnaround from December when it flagged that it might be done cutting.

The RBNZ also said a recent rise in the kiwi-dollar was unhelpful and that "further depreciation would be appropriate in order to support sustainable growth".

Understandably, the kiwi came under immediate pressure, falling half a U.S. cent to within a whisker of 64 cents . It has since steadied around $0.6425.

"We expect more near-term downside as other trading zones digest this fresh easing bias," said Annette Beacher, chief Asia-Pac macro strategist at TDSecurites.

There is little in the way of market-moving economic data out of Asia. In Europe, Britain's fourth-quarter growth data looms large and could decide the fate of the embattled sterling.

Annual economic growth is expected to have slowed to 1.9 percent, from 2.1 percent, an outcome that could push expectations for a hike in interest rates even further out. Markets are currently pricing in a rate hike in 2017.

Sterling was last at $1.4240 , having retreated from this week's high of $1.4367. It remained near a seven-year low of $1.4080 set a week ago.

(Editing by Leslie Adler)