Dollar soars to 6-year peak on yen after Fed, Tokyo stocks cheer
By Wayne Cole and Hideyuki Sano
While the Fed maintained language suggesting that rate hikes would not happen for a "considerable time," it also indicated Fed policymakers think it could raise borrowing costs faster than expected when it starts moving.
The upshot was that the euro skidded to a 14-month trough while gold hit an eight-month low as the dollar swept higher across the board, a move that many investors have been itching to wager on all year.
"Whilst the timing of the first rate rise is data dependent, we continue to expect that the FOMC will begin the normalisation process in March next year."
That stark contrast sent the euro sinking as far as $1.2834, depths last visited in July 2013. Measured against a basket of currencies, the dollar climbed to 84.753, the highest in 14 months.
The dollar also flew to 108.87 yen, its highest since September 2008 and up from around 107.00 before the Fed statement.
A weaker yen is generally viewed as positive for Japanese exports and company earnings, helping lift the Nikkei 1.1 percent to its best since January.
SCOTTISH VOTE STILL TO COME
Many emerging shares were bruised earlier this year by speculation of a sooner start to U.S. rate hikes but analysts say their correction may soon come to an end.
Indeed, Wall Street seemed to find some relief in the very fact that the Fed would not be hiking for a few months at least.
After whipsawing in a wide range, the Dow settled 0.15 percent higher, while the S&P 500 gained 0.13 percent and the Nasdaq 0.21 percent.
Bond investors reacted with more calm than those in currency markets, and nudged yields on the benchmark 10-year note up a modest 2 basis points to 2.62 percent.
Still, a rise in two-year yields to 0.57 percent widened their premium over German debt to 63 basis points, the fattest margin since early 2007.
In commodities, the rise of the dollar was a dead weight on prices. Gold steadied for now at $1,223.21 an ounce after having touched an eight-month trough of $1,216.01.
Brent crude and U.S. crude were both down 0.5 percent on Thursday at $98.47 a barrel and $93.94, respectively.