The US dollar gained against the euro and the yen but gave up ground against certain emerging market currencies in Asia as investors chose to take heart from the Federal Reserve’s emphasis on only gradual future interest rate rises as it raised interest rates by a quarter-point.

On Thursday morning in Europe, the euro was trading down 0.3 per cent on the session at $1.0872, taking its decline since the start of trade on Wednesday to 0.5 per cent. That left it off its Thursday lowpoint of $1.0830.

The dollar traded at Y122.45 against the Japanese yen, up 1 per cent, as investors were lured out of havens by the Fed’s signal of confidence with its first interest rate rise in nine years.

Risk appetite was most evident among Asia’s emerging markets, and the Indonesian rupiah added 0.1 per cent to 14,054 against the dollar. India’s rupee, also thought to be vulnerable if US rates were to rise sharply, added 0.2 per cent to Rs66.6575.

However, Mansoor Mohi-uddin, senior market strategist at RBS in Singapore, warned that the post-Fed bounce in the region was likely to be temporary, with both the Bank of Japan and the People’s Bank of China still set on the course of looser monetary policy that would probably weaken their respective currencies — pulling others lower too.

“Fed hikes plus trend renminbi weakness suggests [South] Korea’s won and Singapore’s, Australia’s and New Zealand’s dollars will all test this year’s lows versus the greenback in the next few months,” he added.

The PBoC set the daily “fix” for the onshore renminbi lower for a ninth successive session, at Rmb6.4757 against the dollar. The currency is allowed to trade 2 per cent either side of that midpoint.

The offshore rate, which faces no such restrictions, followed the general mood and rallied 0.4 per cent against the dollar to Rmb6.549.

The overall mood was calm following the Fed’s move. “The Fed will be absolutely delighted with the lack of volatility across all asset classes,” said Deutsche Bank’s Alan Ruskin.

The mild reaction suggested the market was inclined to believe the Fed intends to raise rates only very gradually, and Fed fund futures suggest roughly two quarter-point rises are factored in for next year.

However, the Fed’s own forecasts imply four quarter-point increases — and not all analysts are comfortable with a dovish interpretation.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, insisted the Fed had delivered a hawkish increase, noting that the decision was unanimous.

“The dot plot reflects expectations for four rate hikes in 2016,” he said. “There were no dissents. This is important. It underscores the decisiveness of the decision.”

Market watchers were more unanimous, however, in ascribing the soft reaction to a year-end relief rally and warned that risks remained.

“Commodity price overshoot, EM capital outflows, disorderly renminbi adjustment — these remain threats to markets which dwarf whether the Fed moves rates too fast or to slowly,” said Kit Juckes at Société Générale.

Underscoring that view was Peter Kinsella at Commerzbank, who said that with the Fed remaining uncertain about the factors constraining inflation, “EM volatility will remain well bid”.