The U.S. dollar strengthened on Thursday after the Federal Reserve left borrowing costs unchanged but signalled further rate hikes to come as attention turned to the European Central Bank policy announcement later in the day.

The Fed's policy decision snapped a string of 10 consecutive rate hikes, but the projections, or dot plot, showed policymakers expect two more increases by the end of 2023. Powell said rate cuts in 2023 would not be appropriate.

The dollar index, which measures the currency against a basket of currencies, rose 0.3% to 103.26, recovering from a four-week low of 102.66 on Wednesday.

The market's attention is now turning to other central bank decisions late this week, with the ECB policy announcement on Thursday before the Bank of Japan on Friday.

The euro was last down 0.1% versus the dollar at $1.0819 after touching a four-week high of $1.0865 on Wednesday.

Money market traders are expecting the ECB to raise the deposit rate by 25 basis points, with a further quarter-point hike seen in July.

The yen plunged 1% to 141.50 per dollar, a level not seen since Nov. 23 last year, with analysts on the lookout for further signs of currency intervention.

The kiwi dollar sank 0.5% to $0.6177 after data showed New Zealand's economy slipped into a technical recession in the first quarter, putting further rate hikes in doubt.

Source: Reuters