NZ dollar falls to 4-month low

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But there is an even split.

As expected, the central bank left its benchmark interest rated unchanged in a range of 1.5 percent to 1.75 percent - but it added language acknowledging the recent rise in inflation, which lays the groundwork for another rate hike (this year's second) in June.

The statement said the economy has been growing at a moderate rate.

The FOMC's two-day meeting followed the release of data Monday that showed inflation measured by the central bank's preferred gauge had hit its 2 per cent target after being below that goal for nearly every month since April 2012. "I think it's basically a non-event".

That pushed French and German 10-year government bond yields to two-week lows.

The major averages ended the day just off their lows of the session. Overnight, stocks on Wall Street were plagued by rising concerns over worsening trade relations between the U.S. and China after the Donald Trump administration threatened to impose restrictions on Chinese telecoms companies' ability to sell telecoms equipment on the United States market.

China's central bank meanwhile has also contributed to dollar strength via liquidity injections into money markets and by cutting reserve requirement ratios for banks by 100 basis points in mid-April.

North, South Korea women's TT teams unite
South Korea's Suh Hyo-won (left) and North Korea's Kim Nam-hae play an exhibition game in Halmstad, Sweden on Thursday. The South Korean players are: Jeon Ji-hee, Kim Ji-ho, Suh Hyo-won, Yang Ha-eun and Yoo Eun-chong.

So far it has been a strong earnings season, with the year-on-year blended earnings growth estimate coming in at more than 25 percent in the first quarter for S&P 500 companies, according to Thomson Reuters I/B/E/S data, while the equivalent figure for the MSCI EMU index (European Economic and Monetary Union) is 14.6 percent in dollar terms. In the same sentence, some traders read the business spending comment as hawkish and the household spending comment as dovish.

The FOMC also noted the weakness in growth in the first quarter, removing a reference in the in March statement that the economic outlook had "strengthened in recent months".

However, there are other factors at play today that put pressure on Asian stock markets and currencies. Short-term rates are going to rise further and while longer-term rates have plateaued, they have done so at a rate that many thought they would not see until the end of this year. The press statement highlights that unemployment is now at pre-crisis levels and unemployment is continue to decline, with the number of people in work in the euro area now at the highest since the introduction of the euro, although the Commission also highlights that some slack remains at least on an overall level. "There will be more questions about "where do we go from here", he said. Just a few 2 years ago the yearly rate was almost zero.

USA stocks rallied modestly just after the Fed statement but pulled back soon after that. U.S. jobs data on Friday should give further indications of the strength of the economy and inflationary pressures.

"It's a continuation of what they're doing - they're still hiking", said Win Thin, senior currency strategist at Brown Brothers Harriman.

The dollar index rose 0.1 percent, with the euro up 0.05 percent to $1.1956.