High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/697b4d1e-a57d-11e5-a91e-162b86790c58.html#ixzz3ufwzwAQF The first tightening of US monetary policy in nearly a decade this week spurred a stronger dollar against its G10 partners, while emerging market currencies showed signs of resilience. The true foreign exchange implications of the Federal Reserve’s first rate raise in nine years will not be felt till January, currency strategists concluded. Their overwhelming tone was that Fed chair Janet Yellen had succeeded in getting the long-anticipated hike away without sparking undue currency volatility. A strong dollar rally on Thursday against EM currencies reversed on Friday, as much driven by a pick-up in the oil price as post-Fed fatigue.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/697b4d1e-a57d-11e5-a91e-162b86790c58.html#ixzz3ufxD0jmt Kit Juckes at Société Générale ascribed the Thursday dollar rally to “adrenalin and a bit of euphoria�, since when “it’s all turned hangoverish�. The South African rand, Malaysia’s ringgit and Indonesia’s rupiah all made end-of-week recoveries against the dollar. Simon Quijano-Evans, EM strategist at Commerzbank, concluded that EM reaction to the Fed rate rise had been “very tame, with the main relative moves being commodity-price driven�. Barclays said EM FX “hardly flinched� at the rise, but warned how a combination of factors, including dollar strength, higher US rates, weak growth in China and soft commodity prices, would heighten volatility next year. Mr Juckes agreed: “There are so many risks, all of which could trigger capital flows into G3 currencies and which, ultimately, will send the dollar higher.� It would have been surprising during such a significant week not to see some dollar strength as the benchmark US overnight borrowing rate was nudged higher. The currency duly rose 1.5 per cent against the euro and the pound. BNP Paribas advised investors to “stick with the dollar trend�, arguing the price action volatility of early December had cleaned up positioning, so opening the way for longer-term participants to go long the dollar in the new year. The market’s exhausted mood meant potential banana skins were brushed aside. The Bank of Japan surprised by adjusting monetary easing on Friday, causing the dollar to jump on the yen, only to later retreat. Mexico and Hong Kong followed the Fed in tightening monetary policy to no great alarm, while Taiwan cut interest rates. Also largely ignored was another weakening by the People’s Bank of China of the trading range for the renminbi, spurring the renminbi to ease for the 10th day in succession. Noting the PBoC’s launch last week of a new index, which measures the renminbi against a basket of currencies, HSBC said that “rising RMB independence� from the dollar pointed to greater volatility in the currency pair. But Jane Foley at Rabobank said a weaker renminbi would have significant implications for China’s trading partners. “If China is successful in weakening the value of its exchange rate, then the central banks of its trading partners could be forced into taking retaliating action,� she said. “This means that the easing cycle of many central banks could be extended.�

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