Dollar holds post-Fed gains, Aussie jumps on data

TOKYO, May 10 (Reuters) The dollar was steady against the yen and euro on Thursday, holding on to gains made after the Federal Reserve kept benchmark U.S. interest rates steady and said its main worry was that inflation would fail to moderate.

While the Fed's statement after its meeting on Wednesday was mostly in line with expectations, it doused speculation that it might cut interest rates more than once this year.

''The dollar rose because there had been some speculation that the statement might be a bit more cautious about the economic outlook,'' said Tomoko Fujii, a senior economist and strategist at Bank of America.

The Fed kept the benchmark federal funds rate at 5.25 percent but said in its statement that core inflation remained somewhat elevated.

The Fed will likely keep rates on hold for a while and only lower them late in the year, Bank of America's Fujii said, adding that her bank expects one rate cut toward the year-end.

The dollar stood at 120.03 yen as of 0311 GMT, little changed from late U.S. trading on Wednesday.

Earlier in the session, the dollar rose as high as 120.24 yen on electronic trading platform EBS, nearing a peak of 120.47 yen hit last week that was the highest since Feb. 27.

The euro was steady at $1.3530 still stuck near Wednesday's session low of about $1.3520.

The Australian and New Zealand dollars jumped on surprisingly strong jobs data that underscored the sturdiness of the two countries' economies, where interest rates are already high.

The Australian dollar rallied nearly 0.5 percent on the day to $0.8317 on data showing a jump in employment in April and a drop in the jobless rate to a 32-year low.

The New Zealand dollar gained about 0.2 percent to $0.7346 after data showed that employment in New Zealand grew at its fastest pace in two and a half years in the first quarter.

After the U.S. central bank announcement, interest rate futures pared back the perceived chances of a Fed rate cut to a single 25 basis-point cut in the fourth quarter.

CENTRAL BANK MEETINGS Investors' focus now shifts to rate decisions on Thursday by the Bank of England, which is seen raising rates to 5.5 percent, and the European Central Bank, which is seen likely to hold rates at 3.75 percent but signal a hike in June.

Market players already expect ECB President Jean-Claude Trichet to point to a June rate rise in his post-meeting remarks, and the key will be whether he provides any hints on the possibility of further rate increases after that.

The euro could come under some profit-taking pressure if Trichet offers no hints on what the ECB might do after June, said Bank of America's Fujii.

The BoE's rate decision could give a lift to sterling, market players said.

''There has been some talk about a 50 basis point BoE rate rise,'' said a Japanese trust bank trader, adding that sterling was likely to get a boost if that turned out to be the case.

Sterling stood at $1.9935 steady from late New York and below the 26-year peak of $2.0134 struck on April 18.

The yen showed little reaction to comments by Bank of Japan Governor Toshihiko Fukui, who reiterated that the central bank will guide monetary policy gradually based on the economy and prices, while carefully monitoring risk factors.

Fukui, who was speaking to a financial committee of parliament's upper house, is due to make a speech later on Thursday.

Reuters RJ RS0918