TOKYO (Reuters) – The U.S. dollar shone while Asian shares slipped on Thursday after the U.S. Federal Reserve announced a plan to start shrinking its balance sheet and signalled one more rate hike later this year.

MSCI’s broadest dollar-denominated index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.4 percent, shrugging off slight gains on Wall Street.South Korea’s Kospi .KS11 was down 0.2 percent, while Australia shed 0.9 percent. Hong Kong’s Hang Seng .HSI posted slim gains.

Japan’s Nikkei .N225 gained 0.8 percent as a rise in U.S. bond yields lifted financial shares, while the yen’s fall against the dollar after the Fed’s decision helped exporters. The Bank of Japan as widely expected left its policy settings unchanged, with markets awaiting a news conference by its governor later in the day (0630 GMT).

U.S. share prices recovered quickly from initial losses following the Fed’s announcement, with the S&P 500 .SPX ending slightly higher, adding to a string of closing records.

“While a rate hike is negative, the fact that the Fed’s confidence in the economy is strong enough to expect a rate hike can be taken as supportive of market sentiment,” said Soichiro Monji, chief strategist at Daiwa SB Investments.

The Fed’s view also prompted rotation into financial shares, which benefit from higher interest rates, from tech shares, he added.

As widely expected, the Fed said it would begin in October to trim its massive holding of U.S. Treasury bonds and mortgage-backed securities acquired in the years after the 2008 financial crisis.

The Fed signalled it still expects one more interest rate hike by the end of the year, despite a recent bout of low inflation, but ratcheted down its long-term interest rate forecasts.

Fed fund rate futures FFF8 are now pricing in about a 65 percent chance of a rate hike by December compared to around 50 percent before the latest meeting. Markets expect the Fed move to coincide with revisions of its economic projections.

The yield on two-year U.S. Treasury notes jumped to 1.451 percent US2YT=RR, its highest level since November 2008. The 10-year U.S. Treasuries yield US10YT=RR rose to 2.278 percent, briefly hitting a six-week high of 2.289 percent.

“The markets reacted to the Fed quite straightforwardly, with shorter yields rising more than long-dated bond yields. The bond markets have fairly strong conviction that low inflation and low growth will persist,” said Hiroko Iwaki, senior strategist at Mizuho Securities.

In the currency market, the rise in Treasury yields boosted the dollar’s attractiveness. The euro EUR= dropped to $1.1879 from above $1.20 just before the Fed’s policy announcement.

Likewise the dollar jumped to 112.595 yen JPY=, a two-month high, from around 111.30.

Gold XAU= last stood at $1,299.6 per ounce after falling to $1,296.1 on Wednesday, its lowest level in more than three weeks.

Oil prices flirted with multi-month highs, despite a rise in U.S. crude inventories, after the Iraqi oil minister said OPEC and its partners were considering extending or deepening output cuts, ahead of the planned meeting between OPEC and non-OPEC nations on Friday.

Brent crude futures LCOc1 rose to a five-month high of $56.48 a barrel and last stood at $56.14.

U.S. benchmark West Texas Intermediate (WTI) crude futures CLc1 hit a four-month high of $50.79 per barrel and last traded at $50.70, flat from the U.S. close on Wednesday.