The dollar retained gains against the yen in Asia on Thursday, while the Aussie staged a sharp rebound on jobs data following the Fed move to hike rates as expected for the first time in a year.
USD/JPY changed hands at 117.61, up 0.50%, while AUD/USD rose 0.19% to 0.7421.
Australia reported jobs data for November with employment change figures showing a massive jump of 39,100 jobs, handily beating an expected 20,000 gain under a participation rate of 64.6%, higher than the 64.5% seen, and an unemployment rate ticking up to 5.7% from 5.6%.
Overnight, the dollar rose on the Fed’s unexpectedly hawkish tone — it announced three likely rate increases next year, in addition to today’s boost.
The U.S. dollar index, which measures the greenback against a basket of currencies, rose 0.35% to 102.39, up to the highest level since 2003.
The stronger currency comes against a backdrop of plans by President-elect Donald Trump to cut taxes and ramp up spending on infrastructure, with investors particularly keen to hear comments from Fed Chair Janet Yellen and eye Treasury yields, which rose sharply to around 2.576%, after trading in a 2.424% to 2.585% range. The earlier high levels were last seen in late September 2014.
Yellen in a press conference emphasized that the changes were only “a very modest adjustment in the path of the Federal Funds Rate” that involved “changes by only some of the participants.”
Yellen noted that “some of the participants but not all of the participants did incorporate some assumption of a change in fiscal policy into their projections,” and this “may have been a factor that was one of several that occasioned the shifts.”
“But I want to emphasize that the shifts that you see here are really very tiny,” Yellen said. She added that while the labour market remains solid, the Fed was “not seeing evidence in labour markets of very substantial upward pressures on labour that could signify extreme shortages of labour that could propel inflation higher in a very rapid way, and inflation is still operating below our objective.”