Dollar Soars to Seven-Week High as Fed Hikes Rates

The dollar surged to a seven-week high on Thursday after the Federal Reserve raised interest rates and signaled further hikes in coming months. The move sent US Treasury yields higher, causing the greenback to climb alongside.

Currency strategist Carol Kong at Commonwealth Bank of Australia said that new central bank chief Kevin Warsh's hawkish stance 'definitely sounded more hawkish than expected' and provided guidance on future hikes, which surprised markets and pushed the dollar higher.

The euro fell to $1.1456, near a seven-week low, while sterling remained flat at $1.3377 ahead of the Bank of England's meeting later in the day. The yen hovered near a two-week low at 156.20 per dollar as markets awaited the Bank of Japan's decision on Friday.

The dollar index reached its strongest level since July 31, trading at 100.33. Rate futures now reflect about a 90% probability of another quarter-percentage-point Fed rate hike by year-end, according to CME Group's FedWatch Tool.