Dollar drops after Fed hikes rates and signals pause

NEW YORK, May 3 (Reuters) – The dollar dropped after the Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point and signaled it may pause further increases.

The pause would give officials time to assess the fallout from recent bank failures, wait on the resolution of a political standoff over the US debt ceiling, and monitor the course of inflation.

The dollar index fell to a session low of 101.05 and the euro hit a session high of USD 1.10925. The dollar also fell to 134.82 against the Japanese yen.

(Reporting by Karen Brettell; Editing by Chizu Nomiyama)