By Shinichi Saoshiro
TOKYO (Reuters) - The euro stood tall on Thursday after Dutch election exit polls pointed to a comfortable win by the prime minister over his far-right rival, while the dollar wallowed at a one-month low after the Federal Reserve sounded less hawkish than anticipated on future rate rises.
The euro climbed to a five-week high of $1.0746 on Thursday, after surging 1.2 percent overnight.
The common currency was boosted as exit polls showed the Netherlands' center-right Prime Minister Mark Rutte roundly saw off a challenge by anti-Islam, anti-EU Geert Wilders in an election on Wednesday, alleviating concerns towards Holland opting to leave the EU.
"The euro's rise was an initial reaction to the Dutch exit polls and the currency could rise further when the European 'mother market' comes into session later in the day," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
"How much further support the euro can garner would depend on how the Dutch vote could now impact the French presidential elections, for example by eroding support for (Marine) Le Pen. We could see the euro gain further if spreads between French and German government bonds tighten today."
The dollar index against a basket of major currencies was down 0.2 percent at 100.560.
It slid more than 1 percent the previous day to touch 100.490, its lowest since Feb. 17.
The greenback took a knock after the Fed ended its two-day policy meeting on Wednesday by increasing interest rates as expected but stuck to projections of three total rate hikes in 2017.
Some traders had begin to suspect it would raise rates four times this year as the economy builds up steam.
U.S. Treasury yields fell sharply in reaction to the Fed's rate view for the rest of the year, prompting the dollar to fall more than 1 percent against the yen. The dollar, which went as high as 115.195 yen earlier this week, last stood at 113.420.
"Speculation of four rate hikes this year may have been excessive. The dot plot was left mostly unchanged, shaking out expectations among dollar bulls that had gone too far," said Koji Fukaya, president of FPG Securities in Tokyo.
The "dot plot" reflects Fed policymakers' interest rate projections.
The yen showed little reaction after the Bank of Japan stood pat on monetary policy and kept the 10-year government bond yield target of around zero percent, as the central bank's decision was well anticipated.
The focus is now on BOJ Governor Haruhiko Kuroda's post-meeting briefing at 0630 GMT for clues on the central bank's stance on whether and when to pull back its massive stimulus program.
Hours after the Fed's rate hike, China's central bank on Thursday raised short-term interest rates for the third time in as many months, a day after the end of the annual session of parliament where leaders warned that tackling debt risks would be a top policy priority this year.
The Chinese yuan weakened to 6.87 per dollar, after strengthening to 6.8455 after the Fed's policy decision.
The pound was 0.2 percent lower at $1.2267 after jumping 1.1 percent overnight. Sterling managed to pull away from a two-month low of $1.2110 struck Tuesday on fears of prolonged political jousting over Brexit terms.
The Swiss franc was steady after gaining about 1 percent against the dollar the previous day.
The Bank of England and the Swiss National Bank are due to make policy decisions later in the day, with both central banks expected to stand pat on monetary policy.
The Australian dollar gave back some its large gains made the previous day against the slumping dollar, hit by weaker-than-expected local employment data.
The Aussie was down 0.3 percent at $0.7687 following its overnight surge of 2 percent to a three-week high of $0.7720.
The New Zealand dollar slipped 0.5 percent to $0.7006 after indicators showed the local economy expanded less than forecast in the final quarter of 2016. The kiwi had risen to a 12-day peak of $0.7050 the previous day.