Dollar Surges as Fed Hikes Rates to Fight Inflation

The US dollar rose against a basket of currencies after the Federal Reserve raised interest rates to combat inflation. The Fed lifted the benchmark interest rate to the 3.75%-4.00% range, with new central bank chief Kevin Warsh joining a unanimous decision. This move effectively acknowledges the Trump administration's inability to control inflation so far.

New policy projections showed that 16 out of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year. The dollar index, which measures the currency against major peers, was up 0.3% at 99.961, its highest in nearly five weeks.

The euro and sterling fell 0.3% and 0.5%, respectively, while the yen rose 0.3% against the dollar to 155.49 yen. Traders see an 80% chance that the Bank of Japan will hike rates on Friday, with two 25-basis-point hikes priced in by the end of January.