At 02:55 ET (06:55 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower at 100.14, having dropped more than 0.6% in the previous session.

The U.S. central bank raised interest rates on Wednesday by 25 basis points as widely expected, and crucially no longer "anticipates" further rate increases will be needed to tame inflation.

This should “mark the end of this hiking cycle as the Fed may rely on the impact of financial conditions deriving from the recent banking crisis to deliver the final bit of tightening,” said analysts at ING, in a note.

The fragility of the U.S. banking system has also weighed on the dollar of late, with the weekend’s collapse of First Republic Bank (NYSE:FRC) meaning that three regional banks have hit the wall in the last couple of months.

The turmoil continued late Wednesday as PacWest Bancorp (NASDAQ:PACW) stock fell over 50% in after-hours trading after Bloomberg reported that the bank would explore strategic options on Thursday.

The focus Thursday now turns to the European Central Bank, which is expected to lift its interest rates later in the session, probably by 25 basis points, without delivering the dovish assessment of future policy.

EUR/USD rose 0.2% to 1.1075, just below its recent one-year high of 1.1096, and is likely to advance to its highest level since 2021, according to analysts at Deutsche Bank.

“We see EUR/USD continuing its drift higher toward 1.15 by mid-year,” the German bank said. “While the Fed now seems open to a pause, the ECB may still have work to do and we expect it to accelerate its QT program.”

Data showing March producer prices for the euro zone are due later in the session, and while they are expected to show a drop of 1.7% in the month, this would still represent an annual gain of 5.9%.

GBP/USD traded 0.1% higher at 1.2575, close to an 11-month high of 1.2594, with the Bank of England also expected to tighten next week as inflation remains highly elevated.

USD/JPY fell 0.3% to 134.29, with the yen helped by falling U.S. bond yields as well as growing safe haven demand in the wake of the growing U.S. banking concerns.