“Powell did not pull any punches on the potential need to tighten aggressively,” TD Securities’ strategists including Jim O’Sullivan wrote in a note. “This supports our bias for further USD resilience early this year, particularly against the funders.”

Going into the Fed meeting, traders were going short on the dollar, with speculators dumping it against the euro, the pound, the yen and the Australian dollar. Net-long aggregate speculative positions versus major peers dropped the most since June 2020, according to the latest data from the Commodity Futures Trading Commission.

Instead, the yen dropped 0.7% on Wednesday to close on 115 against the dollar. Commodity currencies including the Australian and New Zealand dollars have declined more than 2% this year.

–With assistance from Ruth Carson and Cormac Mullen.