Dollar up against euro, yen after Fed rate hike

The dollar picked up against the euro and yen,  ascending after the Federal Reserve’s choice to raise interest levels a rare occurrence since 2006, lifting risk cravings of Treasury yields.

There was a 0.2 percent upward move by the dollar to ¥122.43 in the wake of rising 0.5 percent overnight. The greenback immediately tumbled to as low as 121.38 as instability quickly trailed the Fed’s stride towards regulating monetary policy late yesterday.

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There was a 0.3 percent slip of the euro to US$1.0875. At the end of Wednesday it had fallen 0.6 percent lower after attaining a high of US$1.1013 (RM4.74).

In an all around expected move the Fed raised the scope of its benchmark rate of interest   to between 0.25 percent to 0.50 percent, finishing a prolonged argument about whether the economy was sufficiently solid to withstand higher borrowing expenses.

Fed Chair Janet Yellen underscored that further fixing would be steady and information reliant. Having said this, some market observers noticed a hawkish tone in the assent Fed authorities gave Yellen for the rise and the fact that 1.375 percent projected median target rate for 2016 remained, this implies a four quarter-point rise next year.

“The Fed conveyed a message with a hawkish tone. Regardless of this, there was a pick in US equities and the financial markets reacted calmly. The fact that volatility was retained which is key to thr dollar’s strength, notwithstanding the ascent in Treasury yields,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The Dow increased by 1.3 percent and the S&P 500 by 1.5 percent overnight. The two-year Treasury yield attained a new high in five years of 1.021 percent.

The dollar is liable to get continuous support if there is an extension of risk assets gains said Yamamoto at Mizuho Securities.. “How developing markets and their currencies fare will be crucial to measuring risk cravings after the Fed’s hike,” he included.

 

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