The Federal Open Market Committee, the Fed's policy-making body, decided to raise the target range for the federal funds rate to 0.75 to 1 percent, the Fed said in a statement after a two-day policy meeting. The rate hike was widely anticipated.
The committee also decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1, according to the statement.
The dollar index, which measures the greenback against six major peers, decreased 0.85 percent at 102.5860.
In late New York trading, the euro was up to 1.0621 U.S. dollars from 1.0529 dollars in the previous session, and the British pound was up to 1.2581 dollars from 1.2491 U.S. dollars in the previous session. The Australian dollar increased to 0.7232 dollar from 0.7095 dollar.
The U.S. dollar bought 128.73 Japanese yen, lower than 130.18 Japanese yen of the previous session. The U.S. dollar was down to 0.9747 Swiss franc from 0.9786 Swiss franc, and it fell to 1.2740 Canadian dollars from 1.2840 Canadian dollars.
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