By Caroline Valetkevitch

NEW YORK (Reuters) – Yields on shorter-dated Treasuries hit their highest in more than five years on Wednesday while the dollar rallied after the U.S. Federal Reserve raised interest rates as expected and signaled a faster pace of hikes in 2017.

U.S. stocks fell in choppy action, but were off their lows, following the statement from the Fed, which raised the target federal funds rate 25 basis points to between 0.50 percent and 0.75 percent.

Central bank policymakers also shifted their outlook to one of slightly faster growth, with President-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure.

“It was largely as expected, but it’s pretty clear the market is taking it as a bit more aggressive or hawkish than it had thought,” said Ed Keon, portfolio manager and managing director at QMA, the multi-asset manager wholly-owned by Prudential Financial in Newark.

Yields on two-year Treasury notes rose to their highest since August 2009, while three-year yields hit their highest since May 2010 and five-year yields rose to their highest since May 2011.

U.S. two-year notes fell 4/32 in price to yield 1.247 percent.

The dollar index, which measures the greenback against a basket of six major currencies, was last up 1 percent at 102.11. The index had been trading lower while bond yields were also mostly lower before the Fed statement.

In the U.S. stock market, the Dow Jones industrial average fell 41.96 points, or 0.21 percent, to 19,869.25, the S&P 500 lost 7.7 points, or 0.33895 percent, to 2,264.02 and the Nasdaq Composite dropped 0.33 points, or 0.01 percent, to 5,463.49.

MSCI’s all-country world stock index was down 1.1 percent, adding to earlier losses. The pan-European STOXX 600 share index ended down 0.5 percent.

Gold turned lower and tapped the lowest in more than 10 months following the Fed statement, while oil prices fell as the dollar gained.

Spot gold was down 0.3 percent at $1,154.62 an ounce.

Brent crude futures settled at $53.90 per barrel, down $1.82, or 3.27 percent. U.S. crude ended the session down $1.94, or 3.66 percent at $51.04 per barrel.

(Editing by Robin Pomeroy and Nick Zieminski)