1st LD Writethru: U.S. dollar rallies on Fed rate hike

The U.S. dollar surged against other major currencies Thursday as the Federal Reserve decided Wednesday 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 U.S. 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 labor 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, the Fed said in a statement after concluding a two-day policy meeting Wednesday.

Analysts said the policy divergence between the Fed and other central banks have driven investment flows into the U.S. 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 dollars from 1.0968 dollars in the previous session, and the British pound dropped to 1.4884 dollars from 1.5054 U.S. dollars in the previous session. The Australian dollar declined to 0.7117 U.S. dollar from 0.7253 dollar.

The U.S. dollar bought 122.82 Japanese yen, higher than 121.89 yen of the previous session. The U.S. 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. Endit