The Fed lifted rates by a quarter percentage point for the 12th consecutive time, to 4 percent, bringing the cumulative rate increases to 3 percentage points since the central bank began tightening monetary policy in June 2004.
"It's pretty much as expected, so no real surprises really," said Samarjit Shankar, director of global strategy with Mellon Bank in Boston. The dollar edged back up toward a 25-month high of 116.78 yen hit earlier in the session, before trading at 116.66 yen, up 0.2 percent from late Monday.
Market talk of barrier options lodged at 117 yen could keep the dollar at bay in the near term, but chart analysis showed the greenback could eventually climb to 120 yen.
The euro was up 0.2 percent at $1.2015 after dollar bulls were unable to push the euro zone currency below an option trigger said to lie at $1.1925.
Traders said hedge funds and investment banks could liquidate their bets on the euro if it falls significantly below $1.19.
The pound edged up slightly after the Fed move, but was down 0.2 percent on the day at $1.7654. Market participants had widely expected the Fed to raise rates and to keep language in its accompanying statement that is interpreted to mean more policy tightening is on the way.
"There is very little in the statement to suggest to the market that going into Q2 the Fed is going to change from what it thought before the statement came out," said Steven Englander, North American foreign exchange strategist with Barclays Capital.
The dollar has found firm support so far this year from the relatively favourable interest rate and economic growth differentials compared with other major currencies. The euro has fallen nearly 11.5 percent so far this year against the dollar after hitting record highs late last year and the dollar is up almost 14 percent against the yen.
Earlier, the dollar was bolstered by a better-than-expected report on US manufacturing in October. The ISM measure of national manufacturing activity fell a fraction, to 59.1 from 59.4 the prior month, but was better than the expected forecast of a dip to 57.0. "On its own, the cyclical supportive arguments for the dollar remain intact," said Mellon's Shankar.
The euro was supported last week as senior European Central Bank officials hammered home the bank's determination to tackle inflation amid a brightening growth outlook.
Markets are betting the ECB could lift euro zone rates, stuck at a record low 2 percent for more than two years, as soon as December. The bank holds a monetary policy meeting on Thursday.
As long as the euro holds above $1.19, traders are unlikely to open large new positions ahead of the October US employment report due on Friday.
"The eerie calm that has beset financial markets following the Fed announcement today may be indicative of players refocusing on the upcoming non-farm payrolls report this Friday," said Michael Woolfolk, senior currency strategist with Bank of New York, in a note to clients.