NEW YORK / RankWire.AI / – The U.S. dollar reached its highest point in seven weeks on Thursday after the Federal Reserve implemented its first rate hike in over three years. The dollar index climbed to 100.36 against key currencies, gaining 0.7% overnight and marking its most significant daily gain in three months. Earlier trading saw the index touch 99.961, a five-week high, before the currency continued its ascent as global markets responded to the U.S. rate decision.
The dollar’s strength pushed the euro down to $1.1463, approaching its lowest level in seven weeks. Meanwhile, the pound traded near $1.3372 ahead of a planned policy announcement from the Bank of England. The dollar also appreciated to 155.98 yen, bringing the Japanese currency close to a two-week low. These levels extended earlier moves on Thursday, when the euro was at $1.1502 and the pound at $1.34155. During that session, the dollar traded at 155.49 yen.
The Federal Reserve voted unanimously 12-0 on Wednesday to raise its federal funds target range by 25 basis points, setting it at 3.75% to 4.00%. Officials stated that economic activity continued expanding at a robust pace, with domestic spending remaining resilient. They also emphasized that inflation persisted at elevated levels. The central bank explained that the rate increase aims to facilitate a more timely return of inflation to its 2% target. The new rate range took effect on September 17.
Rise in Treasury Yields Supports Dollar Strength
U.S. Treasury yields surged following the rate decision, with shorter-term maturities experiencing some of the most notable changes. The two-year Treasury yield hovered near 4.72%, reaching its highest point since July 2024. The 10-year yield, a benchmark, moved back toward 5% after dropping to as low as 4.9385% overnight. The 30-year Treasury yield stood close to 5.35%, below its recent 19-year peak of 5.401%. The rise in short-term yields contributed to the dollar’s gains across major currencies.
Alongside the rate hike, the Federal Reserve also published updated economic projections during its September meeting. The median forecast indicates the federal funds rate will be 4.1% at the end of 2026, up from 3.8% projected in June. The median estimate for personal consumption expenditures inflation increased to 3.7% for 2026 from 3.6%. Core PCE inflation was projected at 3.4%, with the unemployment rate expected to be 4.1%. The officials also forecast real gross domestic product growth of 2.3% for 2026.
Focus Remains on Central Bank Policy Decisions
Currency markets are also gearing up for upcoming policy decisions in Britain and Japan. The Bank of England is scheduled to announce its latest decision later Thursday, while the Bank of Japan plans to release its policy outcome on Friday. Elsewhere, the Australian dollar appreciated by 0.35% to $0.7111, and the New Zealand dollar increased by 0.2% to $0.5725. These movements occurred amid a broad adjustment in global currencies following the U.S. rate hike and the rise in short-term Treasury yields.
The recent dollar rally extends the trend initiated after Wednesday’s rate announcement. Updated trading pushed the dollar index beyond its previous five-week high, reaching the strongest level since late July. Several major currencies also hit multiweek lows against the dollar. This rate increase marked the first U.S. policy move since 2023 and followed five consecutive meetings without changes this year. Thursday’s currency levels reflect the first full global trading session after the new target range of 3.75% to 4.00% was established.