NEW YORK / RankWire.AI / – The U.S. dollar surged to a seven-week high on Thursday after the Federal Reserve implemented an interest rate hike. The dollar index climbed to 100.36 against a basket of key currencies. It had appreciated roughly 0.7% during the previous session, marking its most substantial daily rise in three months. Earlier, the index was at 99.961, representing a five-week high. The dollar extended its gains as markets digested the first U.S. rate increase since 2023.
The strengthened dollar caused several major currencies to weaken during Asian and European trading hours. The euro depreciated to approximately $1.1463, nearing a seven-week low. Sterling traded around $1.3372 ahead of the Bank of England’s scheduled policy announcement. Meanwhile, the dollar also gained to 155.98 yen, bringing the Japanese currency close to a two-week low. During earlier trading, the euro was at $1.1502, and sterling at $1.34155. The dollar had previously traded at 155.49 yen before extending its ascent.
On Wednesday, the Federal Reserve unanimously voted 12-0 to raise the federal funds target range by 25 basis points, setting it at 3.75% to 4.00%. Officials indicated that economic activity continued to grow at a solid pace, with domestic spending remaining resilient and inflation remaining elevated. The central bank stated that this increase would aid in achieving a timely return of inflation to its 2% target. The new target range took effect on September 17 after five consecutive meetings without a rate change this year.
Post-Rate Hike, Treasury Yields Climb
U.S. Treasury yields moved higher following the rate decision, exerting further influence on currency trading. The two-year Treasury yield approached 4.72% after reaching its highest point since July 2024. The benchmark 10-year yield rebounded to about 5% after falling to 4.9385% overnight. The 30-year Treasury yield traded near 5.35%, staying below its recent 19-year peak of 5.401%. The shortest-term yields experienced some of the most significant moves after the Federal Reserve’s announcement.
The Federal Reserve also issued updated economic projections alongside its September decision. Officials projected the median federal funds rate to reach 4.1% by the end of 2026, up from 3.8% in the June outlook. The median estimate for 2026 inflation based on personal consumption expenditures increased to 3.7%, with core PCE inflation at an estimated 3.4%. The unemployment rate was forecasted at 4.1%, while real gross domestic product growth was projected at 2.3% for 2026.
Central Bank Policies Shape Global Currency Trends
Market focus also shifted to upcoming policy decisions from Britain and Japan. The Bank of England was scheduled to announce its latest rate decision on Thursday, while the Bank of Japan planned its policy statement for Friday. Elsewhere, the Australian dollar increased by 0.35% to $0.7111, and the New Zealand dollar rose 0.2% to $0.5725. These moves occurred amid widespread adjustments across foreign exchange markets following the U.S. rate hike and the resulting shift in Treasury yields.
Thursday’s rally pushed the dollar index beyond the five-week peak recorded earlier during the session, reaching its highest level since late July. Many major currencies subsequently traded near multiweek lows against the U.S. dollar. The Federal Reserve’s 25-basis-point rate increase concluded a series of unchanged decisions this year. Global markets opened their first full trading day with the new 3.75% to 4.00% U.S. target range in effect, with the dollar maintaining its strongest levels in several weeks.