US dollar rallies on Fed rate hike

The US dollar surged against other major currencies on Thursday as the Federal Reserve decided to raise the interest rate for the first time in nine years, while central banks in Japan and Europe were expected to unleash further stimulus.

The US central bank on Wednesday announced its decision to raise the benchmark interest rate by 25 basis points, marking the end of an era of extraordinary easing monetary policy.

Given the considerable improvement in labour market conditions this year and it's reasonably confident that inflation will rise, the Fed decided to raise the target range for the federal funds rate to 0.25-0.5 percent, Xinhua cited the Fed as saying after concluding a two-day policy meeting on Wednesday.

Analysts said the policy divergence between the Fed and other central banks have driven investment flows into the US and boosted the greenback.

The dollar index, which measures the greenback against six major peers, was up 1.39 percent at 99.233 in late trading.

In late New York trading, the euro decreased to $1.0811 from $1.0968 in the previous session, and the British pound dropped to $1.4884 from $1.5054 in the previous session.

The Australian dollar declined to $0.7117 from $0.7253.

The US dollar bought 122.82 Japanese yen, higher than 121.89 yen of the previous session.

The US dollar rose to 0.9971 Swiss franc from 0.9835 Swiss franc and went up to 1.3960 Canadian dollars from 1.3773 Canadian dollars.