TOKYO (Reuters) - The dollar rose against the yen and Swiss franc as the first U.S. interest rate hike in nine years coaxed investors to emerge from safe-haven currencies, but traders said hurdles - some psychological - lay in wait before any lasting gain.
In a well-anticipated move, the Federal Reserve raised its benchmark interest rates by a quarter of a percentage point on Wednesday. Following the decision, the dollar rose, shares on Wall Street soared, and the two-year Treasury yield US2YT=RR rose to its highest in five years.
The overnight gains triggered a surge in Japan's Nikkei on Thursday. The dollar rose further, edging up 0.3 percent to 122.59 yen JPY=. But traders said they were not holding their breath for a sharp deterioration in the Japanese currency.
"Any dollar/yen appreciation won't come at once, it will rise a step at a time," said Koji Fukaya, president of FPG Securities in Tokyo. "The next lift will likely come in the next quarter, when the second hike comes up on the agenda."
Fed Chair Janet Yellen said further U.S. monetary tightening would be gradual and data-dependent.
That said, some market watchers saw a hawkish tone in the unanimous support Fed officials gave Yellen for the hike, and the fact that their median projected target rate for 2016 remained at 1.375 percent, implying four quarter-point hikes next year.
"The Fed delivered a message with a hawkish tinge. Despite this, U.S. equities gained and the financial markets were overall calm in their reaction," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
"The fact that risk appetite was retained was key to the dollar's strength, in addition to the rise in Treasury yields."
Yamamoto said the dollar was likely to receive sustained support if risk assets extended their gains. "How emerging markets and their currencies fare will be key to gauging risk appetite after the Fed's hike," he added.
To post more gains, the dollar may have to first overcome expectations based on currency moves that followed previous Fed rate hikes.
"Against the key major currencies, we have noticed that previous three Fed tightening episodes resulted in a temporary stall in the dollar rally after the first hike, suggesting a possible temporary decoupling of interest rates and FX," said Heng Koon How, senior currency strategist for Credit Suisse private banking and wealth management in Singapore.
"In addition, the dollar typically encounters some form of profit-taking against the major currencies in the initial phases of the Fed hiking cycle."
Indeed, the dollar's gains have been modest. It was up 0.4 percent at 0.9943 Swiss franc CHF=, another safe-haven currency.
The euro, extending its overnight losses, slipped 0.6 percent to $1.0851 EUR=.
Elsewhere, commodities like crude oil resumed their price decline and hurt commodity currencies such as the Australian and Canadian dollars.
Reflecting the dollar's broad gains following the Fed hike, the People's Bank of China set its official yuan midpoint rate CNY=SAEC at a new 4-1/2-year low Thursday.
Reporting by Shinichi Saoshiro; Additional reporting by Masayuki Kitano in SINGAPORE; Editing by Ryan Woo