USD rallies on Fed's higher funds rate projections

The U.S. dollar rallied against most major currencies Wednesday after the Federal Reserve increased projections of federal funds rate.

The Fed concluded a two-day meeting on Wednesday. Although the central bank repeated that "a highly accommodative stance of monetary policy remains appropriate," it raised its median estimate for the federal funds rate to 1.375 percent by the end of 2015, higher than the 1.125 percent released in June.

The dollar index, which tracks the greenback against a basket of major currencies, hit the highest level in 14 months and traded around the level of 84.6. The dollar also strengthened to a six- year high versus the Japanese yen and broke the key level of 108. 00.

The dollar had been rising against its major peers in the previous nine consecutive weeks on market speculations that the Fed may start to hike interest rates by the middle of next year.

The Fed said in a statement that economic activity is expanding at a moderate pace, however, "the unemployment rate is little changed and a range of labor market indicators suggests that there remains significant underutilization of labor resources."

On the economic front, U.S. home builder confidence for September hit the highest level since November 2005, said the National Association of Home Builders (NAHB) on Wednesday. The NAHB/Wells Fargo Housing Market Index rose to 59, up four points from August.

However, the Labor Department Wednesday reported the U.S. Consumer Price Index (CPI) for all urban consumers fell 0.2 percent in August on a seasonally adjusted basis, marking the first decline since April 2013, leaving more room for the Fed to keep the low-interest rate policy.

In late New York trading, the euro fell to 1.2919 dollars from 1.2961 dollars of the previous session, and the British pound increased to 1.6292 dollars from 1.6280 dollars. The Australian dollar slipped to 0.9004 dollar from 0.9094 dollar.

The dollar bought 108.00 Japanese yen, higher than 107.15 yen of the previous session. The greenback went up 0.9380 Swiss franc from 0.9326 Swiss franc, and moved down to 1.0973 Canadian dollars from 1.0977 Canadian dollars.