By Sam Forgione
NEW YORK (Reuters) - The U.S. dollar fell against a basket of major currencies in the wake of the Federal Reserve's first benchmark interest rate hike in nearly a decade, erasing gains made immediately after the decision.
The U.S. central bank's policy-setting committee raised the range of its benchmark rate by a quarter percentage point to between 0.25 and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
The Fed made clear this was a tentative start to a "gradual" tightening cycle and that in deciding its next move it would put a premium on monitoring inflation, which is mired below target.
The median projected target interest rate for 2016 remained 1.375 percent, implying four quarter-point rate hikes next year. In a news conference following the Fed statement, Fed Chair Janet Yellen said the U.S. economy had held up and grown at a solid pace.
The dollar index, which hit a more than one-week high of 98.558 after the Fed rate decision, was last down 0.43 percent at 97.806 <.DXY>.
While the implied pace of four quarter-point increases in 2016 should have led the dollar higher, the Fed's verbal cues that it would follow a gradual pace of hikes weighed on the greenback against the euro, said Jason Leinwand, managing director at derivatives advisory firm Riverside Risk Advisors in New York.
"Some of the comments in the statement were very clear that they're not going to be raising on a regular basis," Leinwand said.
The euro was last up 0.47 percent against the dollar at $1.09850 > after hitting a session low of $1.08880 immediately after the Fed decision.
The dollar was last mostly flat against the yen at 121.600 yen > after hitting a one-week high against the Japanese currency of 122.300 immediately after the Fed decision.
The dollar was last down 0.8 percent against the Swiss franc at 0.98350 franc >.
(Editing by Meredith Mazzilli and James Dalgleish)
