TOKYO: The US dollar extended its gains on Thursday after the Federal Reserve pointed to the "solid pace" of growth in the world's top economy, signalling a mid-year rate hike was still in play.
In Tokyo, the greenback briefly rose above the 118-yen level before settling back at 117.70 yen in afternoon trade, still up from 117.53 yen in New York.
The euro weakened to $1.1272 from $1.1284, while it ticked up to 132.68 yen, against 132.62 yen in US trade.
"While the Fed pointed out the risk of low inflation, I don't think it changes the main scenario for a rate hike in mid-2015," Masato Yanagiya, head of foreign exchange at Sumitomo Mitsui Banking, told Bloomberg News.
"With the US headed for tighter monetary policy while other countries are increasing stimulus, the dollar will remain strong."
After a two-day meeting, the Fed's policy statement suggested no deviation from its likely course to begin hiking interest rates around the middle of the year -- despite a weak eurozone economy, political uncertainty in Greece, and the negative impact of the strong dollar on US businesses.
"The Fed Statement offered few surprises and some subtle changes that keep (its) options open to either begin the tightening later this year or hold off, should conditions not warrant a shift in policy," National Australia Bank said.
On Wednesday, the policy-setting Federal Open Market Committee (FOMC), as expected, left the key federal funds rate near zero, where it has been pegged since late 2008 to support a recovery in the economy.
The Fed "judges that it can be patient in beginning to normalise the stance of monetary policy," the statement said.
The central bank pointed to improved US labour market conditions, with "strong job gains and a lower unemployment rate," and diminishing slack in the market.
The FOMC had inserted the "patient" language in its December statement. Fed Chair Janet Yellen said last month that the description meant the Fed was unlikely to raise interest rates within the next couple of meetings, in January and in March.
The US economy produced a robust five percent expansion in the third quarter of last year, and for all of 2014 had the strongest job growth in 15 years, pulling the unemployment rate down to 5.6 percent in December.
The dollar was mostly stronger against other Asia-Pacific currencies.
It rose to 61.50 Indian rupees from 61.48 rupees on Wednesday, to 12,531 Indonesian rupiah from 12,524 rupiah, to 1,093.94 South Korean won from 1,085.11 won, and to Tw$ 31.42 from Tw$31.23.
The greenback weakened to 44.15 Philippine pesos from 44.17 pesos, to Sg$1.3519 from Sg$1.3569, while it was unchanged at 32.63 Thai baht.
The Australian dollar weakened to 78.56 US cents from 79.90 US cents.
The Chinese yuan fetched 18.84 yen against 18.91 yen.
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