Dollar Gains after Fed Upgrades its Target Interest-Rate Projection

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Dollar Gains after Fed Upgrades its Target Interest-Rate ProjectionThe dollar surged to its highest level in six years versus the yen after the Federal Reserve hiked its benchmark interest-rate projection yesterday, showcasing the divergent monetary policies of U.S. and Japan.

The U.S. currency advanced 0.3 percent to 108.70 yen as of 1:36 p.m. in New York and touched 108.96 yen, the strongest level since Sept. 8, 2008. The Japan’s currency fell 0.7 percent to 140.39 per euro.

The dollar fell 0.4 percent to $1.2915 per euro after surging to $1.2835, the highest level July since July 2013. The shared currency fell 0.7 percent on Wednesday after the Fed concluded its two-day policy meeting. It ended the day at $1.2960 on Sept. 16.

“We’re still reacting to the higher dollar that was initiated by the Fed yesterday,” Fabian Eliasson, a New York-based Vice President of foreign-exchange sales at Mizuho Financial Group Inc., told Bloomberg News. “Dollar-yen has been on a bid trend for the past couple of weeks that was pushed even further. That’s really the story.”

The U.S. Federal Open Market Committee maintained the record-low interest rates for “a considerable time” after reducing the bond-buying program that is part of its quantitative-easing stimulus package. It also noted that considerable amount of slack remains in the labor market.

The Swiss franc surged after the central bank avoided giving signals that it may lower interest rates to negative in order to curb further gains in the currency. The Swiss franc gained up to 0.4 percent to 1.2066 per euro before later edging up to 1.2069. It rallied 0.8 percent to 93.42 centimes per dollar. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com