The dollar rose against most currencies on Thursday, supported by a rise in U.S. Treasury yields a day after the Federal Reserve announced it would begin to gradually wind down its massive bond-buying program from January.

The dollar had rallied broadly on Wednesday after the Fed said it would reduce its monthly asset purchases by $10 billion, bringing them down to $75 billion. A reduction in Fed stimulus would help lift U.S. bond yields and buoy the currency.

On Thursday, the yield on the benchmark 10-year U.S. Treasury note rose to 2.93 percent from 2.88 on Wednesday.

But in a move to prevent any sharp market reaction, the Fed also said it would likely "be appropriate" to keep overnight rates near zero "well past the time" that the U.S. jobless rate falls below 6.5 percent - effectively extending the timeline for beginning to raise base interest rates.

"The biggest reaction after the Fed's decision yesterday was the rise in rates in the belly of the U.S. curve (five to seven years)," said Federico Garcia Zamora, director of currency strategies and senior portfolio manager at Standish Asset Management in Boston.

Standish oversees assets of about $163 billion.

"The market is not convinced that the Fed can keep interest rates low for as long as they think. And in that regard, we think the dollar will continue to appreciate in 2014."

In late trading, the euro fell 0.2 percent against the dollar to $1.3657, after hitting its lowest in two weeks at $1.3627.

Losses in the euro should be limited after the European Central Bank's rejection of short-term moves to ease monetary policy and the repayment of loans to the ECB by banks, which has squeezed the volume of available euros.

Data showing the euro zone current account surplus hit a record high in October also helped support the euro zone common currency.

Implied volatility in euro/dollar options fell sharply on Thursday. One-month implied volatility, a gauge of how sharp a currency move will be, fell to 6.1 percent from as much as 6.8 percent on Wednesday.

This implies the currency will trade within a range in the coming month.

The dollar jumped to a five-year high against the yen of 104.36 yen, according to Reuters data, before retreating to 104.19, down 0.1 percent on the day.

The greenback slipped against the yen after data showed the number of Americans filing new claims for unemployment benefits rose last week to the highest in nearly nine months, casting a shadow on the labor market.

Other reports showed U.S. home resales at a near one-year low in November and a slight pick-up in factory activity in the mid-Atlantic region in December.

Analysts said the actual reduction in the Fed's monthly asset purchases was minimal - $10 billion - and they remain at a staggering $75 billion a month in extra dollars that are coursing through global markets.

The dollar rose 0.5 percent against the Swiss franc to 0.8981 franc.

"The rise in dollar/Swiss franc along with dollar/yen suggests to me that carry trade funding is moving decisively out of dollars and into other currencies," said Marshall Gittler, head of IronFX Global in Limassol, Cyprus.

"Plus the last vestiges of the anti-inflation hedges are being dismantled, such as gold and silver. I think this marks the start of the dollar rally that many commentators have been predicting for 2014."

The Australian dollar, already under pressure because of the country's central bank's desire to see it weaken, hovered near a 3-1/2-year low in the wake of the Fed's announcement. The Aussie fell as low as US$0.8820, its lowest since August 2010, and was last at US$0.8858, down 0.2 percent.