The benchmark S&P/ASX200 index on Thursday finished up 86.2 points or 1.12 per cent, to a 13-day high of 7,782.0, while the broader All Ordinaries rose 90.1 points, or 1.13 per cent, to 8,044.6.
The gains were the ASX200's best since a 1.47 per cent rise on February 2 and came after the Fed overnight kept rates on hold, as expected, while issuing a "dot plot" projection that continued to forecast three rate cuts by year's end despite a recent uptick in US inflation.
"This is a Fed that wants to reduce interest rates," said Seema Shah, chief global strategist with Principal Asset Management.
The Fed did trim its predictions for rate cuts in 2025, forecasting three cuts rather than the four it predicted in December due to strong recent jobs data and hotter-than-expected consumer price increases in January and February.
Closer to home, the market was also digesting a far stronger-than-expected domestic labour market report.
Australia's economy added 116,500 jobs in February, compared with consensus expectations of 40,000 more jobs, while the unemployment rate fell 0.4 percentage points to 3.7 per cent.
"Today's result will greatly reduce pressure on the Reserve Bank to signal rate cuts anytime soon," Betashares chief economist David Bassanese said.
Paul Bloxham, HSBC's chief economist for Australia and New Zealand, said after analysing the data he thought it was unlikely the RBA would cut interest rates at all in 2024, reducing them only in early 2025.
The Australian dollar quickly jumped to a one-week high against its US counterpart following the jobs report, indicating currency traders also viewed the readout as supporting interest rates remaining high for longer.
Nine of the ASX's 11 sectors gained ground on Thursday, with health care and utilities losing it.
Financials were the biggest mover, climbing 1.7 per cent as all of the Big Four banks finished in the green.
NAB rose 2.6 per cent to $34.78, CBA added 2.0 per cent to $118, Westpac finished up 1.9 per cent to $26.67 and ANZ climbed 1.1 per cent to $29.01.
In the heavyweight mining sector, gold miners were shining after the precious metal rose above $US2,200 an ounce following the Fed meeting.
Newmont rose 3.0 per cent, Evolution grew 5.2 per cent and Northern Star climbed 2.3 per cent.
Elsewhere in the sector, BHP rose 0.8 per cent to $44.15, Fortescue climbed 1.7 per cent to $25.17 and Rio Tinto dipped 0.1 per cent to $121.14.
Atlas Arteria rose 1.7 per cent to $5.37 after the toll road operator announced chief executive and managing director Graeme Bevans intended to retire but would stay on until a replacement could be found.
Webjet soared 9.2 per cent to a four-year high of $8.69 after the online travel company said at its strategy day presentations it was on track to deliver $10 billion in total transaction volume by 2029/30.
The Australian dollar was buying 66.29 US cents, from 65.30 US cents at Wednesday's ASX close.
The Aussie had also jumped to more than 100 yen for the first time since early 2015.
The Japanese currency has been slumping despite the Bank of Japan lifting interest rates for the first time in 17 years on Tuesday.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Thursday up 86.2 points, or 1.1 per cent, to 7,782
* The broader All Ordinaries gained 90.1 points, or 1.13 per cent, to 8.044.6
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.29 US cents, from 65.30 US cents at Wednesday's ASX close
* 100.02 Japanese yen, from 98.96 yen
* 60.61 Euro cents, from 60.08 Euro cents
* 51.81 British pence, from 51.34 pence
* 108.73 NZ cents, from 108.04 NZ cents
