NEW YORK / RankWire.AI / – On Thursday, the U.S. dollar surged to its highest point in seven weeks following the Federal Reserve’s decision to increase interest rates for the first time in over three years. The dollar index climbed to 100.36 against its major counterparts after a 0.7% gain overnight, marking its most significant daily rise in three months. Earlier trading saw the index reach 99.961, a five-week high, before extending gains as global markets absorbed the rate decision.
This strengthening of the dollar caused the euro to fall to $1.1463, approaching its lowest level in seven weeks. The pound traded near $1.3372 ahead of the upcoming Bank of England policy announcement. Meanwhile, the dollar strengthened to 155.98 yen, bringing the Japanese currency close to a two-week low. These levels reflected earlier moves on Thursday when the euro was at $1.1502 and sterling at $1.34155, with the yen trading at 155.49 during that session’s early stage.
The Federal Reserve unanimously voted 12-0 on Wednesday to raise the federal funds target range by 25 basis points, establishing a new range of 3.75% to 4.00%. Officials noted that economic activity continued to grow at a solid rate, and domestic spending remained resilient, though inflation still remained high. They stated that the rate hike was intended to facilitate a more timely return of inflation to the 2% goal. This adjustment took effect on September 17.
Bond Yields Support Dollar Gains
U.S. Treasury yields responded sharply after the rate increase, with shorter maturities experiencing some of the largest fluctuations. The two-year Treasury yield hovered near 4.72% after reaching its highest point since July 2024. Meanwhile, the 10-year yield returned to around 5% after falling to as low as 4.9385% overnight, and the 30-year Treasury yield stood at approximately 5.35%, below its recent 19-year high of 5.401%. Elevated short-term yields contributed to the dollar’s upward momentum across major currency markets.
Alongside the rate hike, the Federal Reserve published updated economic projections. The median forecast for the federal funds rate at the end of 2026 increased to 4.1% from 3.8% in June. The forecast for personal consumption expenditures inflation rose slightly to 3.7% for 2026 from 3.6%, with core PCE inflation projected at 3.4%, and the unemployment rate estimated at 4.1%. Additionally, officials projected real GDP growth of 2.3% for 2026.
Global Central Bank Decisions Under Watch
Markets were also eyeing upcoming monetary policy decisions from Britain and Japan, with the Bank of England set to announce its latest move later Thursday, and the Bank of Japan scheduled to release its decision on Friday. Elsewhere, the Australian dollar increased by 0.35% to $0.7111, while the New Zealand dollar rose 0.2% to $0.5725. These shifts occurred amid a broad adjustment in global currencies following the U.S. rate hike and the rise in short-term Treasury yields.
The dollar’s recent surge continues the upward trend initiated after Wednesday’s rate announcement, with updated trading pushing the dollar index above its five-week peak and marking its strongest level since late July. This move also left several major currencies at multiweek lows against the greenback. The rate increase was the first U.S. hike since 2023 and followed five consecutive policy meetings without change earlier this year. Thursday’s exchange rates reflect the first full global trading session after the new target range of 3.75% to 4.00% was introduced.