Investors were awaiting Friday’s monthly U.S. non-farm payrolls report for greater signs of the Fed’s likely rate hike trajectory through the end of the year.
Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016.
Even before the Fed statement, the dollar had hit more than six-week highs against the yen as traders digested the possibility of ultra-long U.S. bond issuance and stronger-than-expected April U.S. services sector growth.
The dollar rose by as much as 0.7 percent against the yen, and hit 112.69 yen, the highest level since March 21, as the Fed statement solidified expectations for a rate hike in June and another in the second half of the year.
The dollar also jumped against the Swiss franc, sterling and the Canadian dollar.
US Dollar Gains But Doesn’t Break Out On Fed Hold, June Expectations Soar
referring to While the group did make mention of slow growth did slow through the first period, officials had found the slowing met their expectations, and believed that the slump would be temporary.
However, front-end bold yields rose along with the currency, implying market speculation is firming up behind a June hike.
The US Dollar received a modest boost after the FOMC held its benchmark interest rate at 0.75-1.00% – as expected – as rhetoric nevertheless leveraged expectations of a hike at the June meeting.
Looking at Fed Fund futures (a product used to hedge against expected interest rate changes in the future – the probability of a rate hike at the June 15th FOMC meeting has increased to a 94% probability.
In the FOMC’s statement, it further noted that the labor market remained on solid footing, and household spending rose modestly even as growth in economic activity slowed.
referring to The dollar rose 0.1 percent to 112.84 yen.
On Wednesday, the dollar also rose against currencies such as the Swiss franc, sterling and the Canadian dollar.
The dollar hit a six-week high against the yen on Thursday, after the US Federal Reserve downplayed weak first-quarter economic growth and was seen as leaving the door open to raising interest rates in June.
The Australian dollar nursed its losses after tumbling 1.5 percent on Wednesday, its biggest one-day percentage drop since Nov. 9.
Barring an exceptional surprise, the statement “will leave the market feeling confident the Fed will go,” he added.