Dollar Rises against Yen, Euro After Fed Sounds Hawkish Note

The dollar was higher against the yen and the euro in Asia trade Thursday, as a slightly more hawkish tone in U.S. Federal Open Market Committee statement reaffirmed that the Fed was moving toward a tighter monetary policy more quickly than its peers.

The dollar USDJPY, +0.21% was at ¥109.03 from ¥108.90 late Wednesday in New York, while the euro EURUSD, -0.45% was at $1.2613 from $1.2631. The common currency EURJPY, -0.23% was at ¥137.53 from ¥137.69.

The greenback hovered around the ¥109.00 threshold throughout the session after briefly touching ¥109.12, its highest since Oct. 7.

While making a widely expected decision to end its monthly bond-buying at the end of this month, the Federal Reserve said in its statement that rates could rise sooner or later, depending on how the economy performs. The central bank also dropped the word “significant” in describing underutilization of the labor market, a sign it is more upbeat on jobs.

During Asia trade, the dollar weathered profit-taking and selling from Japanese exporters related to settlements for commercial transactions ahead of month-end book closing.

“The market responded amenably to the FOMC,” said Ayako Sera, head of research at Sumitomo Mitsui Trust Bank. The stock market’s gain also supported the dollar-yen, she said.

The Nikkei Stock Index NIK, +0.67% rose 0.7% to 15,664.58 as of midday.

The dollar is “trending upward,” said Mizuho Securities chief FX strategist Kengo Suzuki. The FOMC statement reminded the market of the divergence of U.S. and Japanese monetary policies over the mid to longer term, he said.

Sumitomo Mitsui’s Ms. Sera said, “We may have to expect the dollar to go toward ¥110” later this week. But the greenback won’t likely break above ¥110 anytime soon, she added, noting that the FOMC statement showed that the U.S. now has a “free hand” in making rate decision, without making any specific commitment.

The WSJ Dollar Index BUXX, +0.28% a measure of the dollar against a basket of major currencies, was up 0.13% at 78.04.

Source: MarketWatch