The dollar nursed bitter losses in Asia on Thursday while sovereign bonds savored their biggest rally in nine months after the Federal Reserve hiked interest rates, as expected, but signaled no pick-up in the pace of tightening.
The sigh of relief was heard across Asia as investors had feared faster U.S. hikes and more political upheaval in Europe could spook funds out of emerging markets.
"The Fed makes the world safe for risk until June," said CitiFX strategist Steven Englander. "Buy emerging market FX, equities, commodities."
Somebody seemed to be listening as gold, copper and oil all rallied as the dollar dropped. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.9 percent to its highest since mid-2015.
South Korea's market .KS11 climbed 1.0 percent but Japan's Nikkei .N225 went the other way, easing 0.4 percent, as a jump in the yen pressured exporters.
The Dow .DJI had ended Wednesday with gains of 0.54 percent, while the S&P 500 .SPX added 0.84 percent and the Nasdaq .IXIC 0.74 percent.
The Fed lifted its funds rate by 25 basis points to a range of 0.75 percent to 1.00 percent, but said further increases would only be "gradual."
Crucially, officials stuck to their outlook for two more hikes this year and three more in 2018, when many had expected an accelerated spate of moves.
Rather, the Fed said its inflation target was "symmetric," indicating that after a decade of below-target inflation it could tolerate a quicker pace of price rises.
That was painful news for bond bears who had built up huge short positions in Treasuries in anticipation of a hawkish Fed.
Yields on two-year notes US2YT=RR were down at 1.30 percent, having fallen 8 basis points overnight in the biggest daily rally since June last year. They had been at their highest since June 2009.
The drop pulled the rug out from the dollar, which sank to a three-week low of 100.510 against a basket of currencies .DXY.
The euro was taking in the view at $1.0737 EUR=, having climbed 1.2 percent overnight in its steepest rise since June. The dollar suffered similar losses on the yen to huddle at 113.34 JPY=.
Richard Franulovich, a forex analyst at Westpac, noted history showed a strong positive correlation between the dollar and yields one week after a Fed meeting and the direction and magnitude of the change in the dots from meeting to meeting.
"The absence of any overt hawkish guidance from the Fed and their dots should leave the dollar trading on the back foot over the next month," he said.
The yen and the Swiss franc tended to move the most in the first week, he added, but the impact tended to be longer lasting on the Australian and Canadian dollars.
Indeed, the Aussie currency rose a rousing 2 percent on Wednesday to stand at $0.7710 AUD=D4.
A protracted bout of weakness for the U.S. dollar would be seen as positive for commodities priced in the currency.
Spot gold XAU= was up at $1,221.38 an ounce, after enjoying its biggest daily jump since September.
U.S. crude futures CLc1 rose 25 cents to $49.11 per barrel, adding to a 2.4 percent gain on Wednesday. Brent LCOc1 gained 32 cents to $52.13, after rising more than a dollar overnight.