NEW YORK / RankWire.AI / – The U.S. dollar rose to a seven-week high on Thursday after the Federal Reserve increased interest rates. The dollar index reached 100.36 against a basket of major currencies. It had gained about 0.7% during the previous session. The move marked its largest daily increase in three months. Earlier trading placed the index at 99.961, then a five-week high. The currency extended those gains as markets processed the first U.S. rate increase since 2023.
The stronger dollar pushed several major currencies lower during Asian and European trading. The euro fell to about $1.1463, near a seven-week low. Sterling traded around $1.3372 before the Bank of England’s scheduled policy announcement. The dollar also climbed to 155.98 yen, putting the Japanese currency near a two-week low. Earlier in the session, the euro stood at $1.1502 and sterling at $1.34155. The dollar had traded at 155.49 yen before extending its rise.
The Federal Reserve voted 12-0 on Wednesday to raise the federal funds target range by 25 basis points. The new range stands at 3.75% to 4.00%. Officials said economic activity continued to expand at a solid pace. They also reported resilient domestic spending and elevated inflation. The central bank said the increase would support a timely return of inflation to its 2% goal. The new target range took effect on September 17 after five consecutive meetings without a rate change this year.
Treasury yields rise after rate decision
U.S. Treasury yields moved higher after the interest-rate decision, adding another major influence on currency trading. The two-year Treasury yield approached 4.72% after reaching its highest level since July 2024. The benchmark 10-year yield returned to about 5% after falling to 4.9385% overnight. The 30-year Treasury yield traded near 5.35%. It remained below a recent 19-year high of 5.401%. Shorter-term yields recorded some of the largest moves following the Federal Reserve announcement.
The Federal Reserve also released updated economic projections with its September decision. Officials placed the median federal funds rate projection at 4.1% for the end of 2026. That figure stood at 3.8% in the June projections. The median estimate for 2026 personal consumption expenditures inflation rose to 3.7%. Core PCE inflation reached a projected 3.4%. Officials placed the unemployment rate at 4.1% and projected real gross domestic product growth of 2.3% for 2026.
Global currency markets track central bank decisions
Attention across currency markets also turned to scheduled policy decisions in Britain and Japan. The Bank of England planned to announce its latest rate decision on Thursday. The Bank of Japan scheduled its policy announcement for Friday. Elsewhere, the Australian dollar gained 0.35% to $0.7111. The New Zealand dollar rose 0.2% to $0.5725. The moves came during a broad adjustment across foreign exchange markets after the U.S. rate increase and the accompanying shift in Treasury yields.
Thursday’s advance carried the dollar index beyond the five-week peak recorded earlier in the session. It also lifted the index to its strongest level since late July. Several major currencies consequently traded near multiweek lows against the U.S. currency. The Federal Reserve’s 25-basis-point increase ended a run of unchanged decisions this year. Global markets entered their first full trading session with the new 3.75% to 4.00% U.S. target range in place and the dollar holding its strongest levels in several weeks.