The Australian dollar has rallied almost one US cent, after the US Federal Reserve raised its interest rate for the first time this year and paved the way for more rate hikes later this year.

At 0635 AEDT on Thursday, the local currency was worth 77.74 US cents, up from 76.96 US cents on Wednesday.

The US central bank raised its federal funds rate as expected, and forecast at least two more hikes for 2018, signalling growing confidence that tax cuts and government spending will boost the economy and inflation.

AAP

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