Dollar whipsaws after Fed announces rate hikes

Key Points
  • Traders wait clues from Fed on U.S. rate hike path
  • Euro stuck below $1.18 ahead of Thursday's ECB meeting
  • Sterling gives up gains after Tuesday's Brexit vote boost
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The dollar strengthened, hitting a fresh session high before paring gains, after the Federal Reserve announced it would raise rates by 0.25 percent, which fell in-line with expectations.

The U.S. central bank is released its latest policy statement at 2 p.m. EDT. Fed Chairman Jerome Powell announced the Fed would raise rates by 0.25 percent to a range of 1.75 percent to 2.00 percent, as expected. The Fed also said it anticipated two more rate hikes in 2018 for a total of four.

"The main takeaway is that the economy is doing very well," Powell said during a press release following the announcement.

"We think that gradually returning inflation levels to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive."

After the announcement the dollar strengthened briefly to 93.987, its highest level since June 5, before paring gains. The greenback then dipped 0.15 percent in the afternoon.

In afternoon trading, the dollar was up slightly at 110.46 after earlier hitting a three-week high at 110.71 yen.

The euro pared earlier gains against the dollar. It was last up 0.09 percent at 1.1754 and was 0.33 percent stronger at 130.03 yen.

The British pound dipped to 1.3363, above a one-week low of $1.3309. I failed to hold gains made on Tuesday when it briefly rose to $1.3424 after British Prime Minister Theresa May saw off a parliamentary rebellion over amendments to a bill for the country's exit from the European Union next year.

Slower-than-expected British inflation data on Wednesday also hurt the pound, as it weakened the case for a Bank of England rate rise in August.

The , which has fallen heavily in recent weeks on concerns an escalating trade dispute with the United States would hit Canada's economy hard, rebounded 0.34 percent to C$1.2969. After the announcement, the dollar gained against the Canadian dollar, last trading up 0.05 percent.

The Norwegian crown rallied for a second straight session against the dollar and the euro, hitting its strongest level against the single currency since late October after an upbeat central bank survey raised expectations of tighter monetary policy.

Stronger dollar troubles emerging markets

--CNBC's Chloe Aiello contributed to this report.