Benchmark equity indexes advanced in Australia, Japan and Hong Kong, while falling in South Korea. Futures contract for US shares also rallied, suggesting a reversal from the previous session, when the S&P 500 closed lower. Mainland China markets remain shut for a holiday.

The yen fell as much as 1.1%, after having surged late on Wednesday in New York. The renewed decline suggests investors are sceptical the Japanese authorities will be able to prevent the currency from declining, given the country’s wide interest-rate differential with the US. Japan’s top currency official Masato Kanda said he had nothing to say when asked if officials had intervened. 

“The bar was set high for a hawkish surprise last night” and the Fed “did not attempt to leap it”, said Kyle Rodda, a senior market analyst at Capital.com. “The markets were also caught off guard by what appears to be another sneak attack from Japan’s Ministry of Finance, with a rapid move in the yen displaying the hallmarks of further intervention.”

The Fed downplayed the potential for imminent rate hikes as officials unanimously decided to leave the target range for the benchmark federal funds rate at 5.25% to 5.5% following a slew of data that pointed to sticky inflation pressures.

Powell said it’s unlikely the Fed’s next move would be to raise rates, saying authorities would need to see persuasive evidence that policy is not tight enough to bring inflation back toward the central bank’s 2% target.

“Jay Powell threaded the needle perfectly,” said Ronald Temple at Lazard Asset Management. “He did not take the bait to talk about hiking rates. I believe the FOMC’s cautious approach will be a winner over time as inflation subsides as we progress through the year.”

Dollar declines

Bloomberg’s index of the dollar fell for a second day, reflecting the drop in US yields following the Fed’s decision. Treasuries were little changed with the benchmark 10-year yield at 4.62%. 

While the Fed signalled it’s not planning to cut rates so soon, the fact officials are slowing the pace at which they shrink their balance sheet, it will mean less upward pressure on bond yields, according to Sonu Varghese at Carson Group.

In its plan unveiled on Wednesday, the Fed said it will lower the monthly cap on how much Treasuries it will allow to mature without being reinvested, to $25-billion from $60-billion, while keeping the cap for mortgage-backed securities unchanged at $35-billion.

In commodities, oil recovered some of its losses from Wednesday when a big jump in US crude inventories added to concerns about weakening demand. Gold advanced as investors found comfort in the Fed’s signals it will still pivot to lowering borrowing costs after gaining enough confidence price gains are cooling.