US dollar ticks higher after landmark Fed rate hike

[NEW YORK] The US dollar rose slightly against the euro and the yen on Wednesday after the US Federal Reserve's historic move to raise interest rates for the first time in nine years.

The modest quarter percentage point hike had been widely expected to come at the Fed's December monetary policy meeting, given moderate growth in the US economy.

The dollar rose to US$1.0911 per euro around 2200 GMT from US$1.0930 at the same time on Tuesday. The greenback was up 0.5 per cent at 122.26 yen.

The Fed raised its benchmark federal funds rate from the zero bound, where it was pegged since December 2008, to 0.25-0.50 per cent, kicking off a likely series of rate increases which the central bank pledged would be "gradual" and dependent on incoming economic data.

Kathy Lien of BK Asset Management noted "the most important monetary policy event of the year proved to be a dud for market volatility."

"This muted reaction to a historic change in monetary policy is exactly what the Federal Reserve likes to see and despite all of their critics, we see this as a credit to their proper management of market expectations." But some expect the dollar could now head lower after the event.

"With the Fed so far offering few surprises, the dollar is at risk of losing ground, having been bought in anticipation of today's action which now leaves it susceptible to being sold on the news," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

AFP