The U.S. dollar extended earlier gains on Thursday, recovering ground from its post-midterm election slide the previous day, as the Federal Reserve kept its monetary policy on hold but indicated further gradual rate hikes in the future.

The central bank kept its benchmark interest rates at 2%-2.25%, and said it expected further gradual interest rate hikes. Fed funds futures indicate a 71.4% chance for a 25 basis point raise in December.

The Fed statement didn’t take note of volatility in U.S. stocks throughout October, which was also notable, said Lee Ferridge, macro strategist for North America and head of cross-asset strategy at State Street Global Markets. “They haven’t given themselves any wiggle room,” with respect to continued stock volatility and how that might impact policy decisions, he added. Previous Fed chairpersons may have been more cautious, Ferridge said.

The ICE U.S. Dollar Index DXY, +0.54%  in response extended its gains and was up 0.7% at 96.629, its highest level in about a week, overshadowing other drivers in currency markets and reversing dynamics.

The gauge was also unshaken by the resignation of Attorney General Jeff Sessions late Wednesday, and retracing losses incurred on the back of the midterm election results. The Democrats took control of the House of Representatives in Tuesday’s vote, sparking expectations for less government stimulus going forward.

Don’t miss: Why the midterm results sparked an emerging-markets rally

In other central bank news, the Reserve Bank of New Zealand left rates unchanged and reiterated that it would stay that way into 2020. The New Zealand dollar NZDUSD, -0.5897%  was last little changed in negative territory for much of the session, but sold off as its U.S. rival strengthened. It last bought $0.6751.

Similarly, commodity-linked currencies such as the Canadian dollar USDCAD, +0.4880%  and the Australian dollar AUDUSD, -0.3436%  were stronger for much of Thursday thanks to upbeat Chinese trade data for October. Export and import growth was above expectations at 15.6% and 21.4%, respectively, and China’s trade balance came in at $34 billion, compared with $41.1 billion expected.

Strength in both imports and exports was encouraging, and there weren’t many signs that the U.S.-China trade spat was a drag on the economy,” wrote Marc Ostwald, global strategist and chief economist at ADM Investor Services International.

Read: Here’s why a trade deal might not save China’s economy or emerging markets

China’s yuan was moderately weaker versus the buck, with one dollar buying 6.9343 yuan USDCNY, +0.2066%  in Beijing, up 0.2%, and 6.9395 yuan USDCNH, +0.2949%  in the offshore market, up 0.3%.

In the U.K., the British pound GBPUSD, -0.5866%  slipped back after its multiday climb higher, as Irish Prime Minister Leo Varadkar suggested on Wednesday it would be tough to still seal a deal between London and Brussels in November.

Sterling weakened to $1.3058, compared with $1.3126 late Wednesday in New York.

The euro EURUSD, -0.5864%  , the buck’s biggest rival, was down 0.6% at $1.1364, according to FactSet.

Want news about Europe delivered to your inbox? Subscribe to MarketWatch’s free Europe Daily newsletter. Sign up here.