NEW YORK / RankWire.AI / – On Thursday, the U.S. dollar achieved a seven-week high after the Federal Reserve implemented its first interest rate increase in over three years. The dollar index climbed to 100.36 against key currencies, advancing 0.7% overnight—its largest daily gain in three months. Earlier, the index touched 99.961, marking a five-week high, before the currency continued its upward move as global markets digested the rate decision.
The dollar’s strength caused the euro to decline to $1.1463, close to its lowest level in seven weeks. Meanwhile, the pound traded near $1.3372 ahead of the upcoming Bank of England policy announcement. The dollar also appreciated to 155.98 yen, bringing the Japanese currency close to a two-week low. These levels extended the movements seen earlier Thursday, when the euro was at $1.1502 and sterling at $1.34155. During that session, the dollar traded at 155.49 yen.
The Federal Reserve unanimously voted 12-0 on Wednesday to raise its federal funds target range by 25 basis points, setting it at 3.75% to 4.00%. Policymakers noted that economic activity continued to grow steadily, with resilient domestic spending. They also emphasized that inflation remained high and that the rate hike aimed to support a more timely return of inflation to its 2% target. The new target range became effective on September 17.
Treasury yields surge alongside dollar appreciation
U.S. Treasury yields experienced notable increases after the rate decision, especially in shorter-term maturities. The two-year Treasury yield approached 4.72%, 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 hovered near 5.35%, still below the recent 19-year high of 5.401%. The rise in short-term yields contributed to the dollar’s strength across major currencies.
Alongside the rate hike, the Federal Reserve published updated economic projections. The median forecast suggested the federal funds rate would reach 4.1% at the end of 2026, up from 3.8% in June. The median projection 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 forecast at 4.1%. The Fed also estimated real gross domestic product growth at 2.3% for 2026.
Focus remains on key central bank decisions
Global currency markets prepared for upcoming monetary policy decisions from Britain and Japan, with the Bank of England expected to announce its latest stance later Thursday. The Bank of Japan was scheduled to decide on its policy on Friday. Elsewhere, the Australian dollar gained 0.35%, reaching $0.7111, while the New Zealand dollar increased by 0.2% to $0.5725. These shifts occurred amid broad currency adjustments following the U.S. rate increase and the rise in short-term Treasury yields.
The dollar’s recent climb continues from the initial boost seen after Wednesday’s rate announcement. Trading updates pushed the dollar index above its five-week peak, reaching its highest level since late July. Several major currencies also hit multi-week lows against the greenback. This rate increase marked the first U.S. policy tightening since 2023 and came after five consecutive meetings without changes this year. The currency levels on Thursday reflected the first full global trading session following the announcement of the new 3.75% to 4.00% target range.