A slight bullish turn by the Federal Reserve Wednesday sent the US dollar sharply higher against other major currencies.
The Fed, after a two-day policy meeting, made no unexpected policy changes, announcing the wind-up of the quantitative easing stimulus while keeping in place plans to maintain its ultra-low interest rate well into 2015.
But a shift to a more optimistic assessment of the labor market, after having shown doubts about gains all year, showed a "hawkish" turn by the policy makers of the Federal Open Market committee, analysts said, bolstering the greenback.
The dollar shot more than a penny higher to $1.2634 against the euro, returning to the levels it had reached a month ago.
US Treasury yields surged as well, the five-year treasury note pushing up a sharp 10 basis points before easing back to 1.58 percent, compared with 1.52 percent the previous day.
"The very marginal shift in language was a bit of a hawkish surprise to global investors, who were expecting no changes," said Omer Esiner of Commonwealth Foreign Exchange.
Kit Juckes of Societe Generale though cautioned about reading the Fed`s shift too aggressively.
"The FOMC sometimes seems to wander schizophrenically between focusing on the (slowly improving) labor market and obsessing about disinflation, wages et al," he said.
The Fed remains "on track for a June hike as long as market volatility doesn`t derail growth," he said.
