Global equity markets ended a volatile week lower as investors absorbed the Federal Reserve's unexpected rate increase, with emerging-market currencies bearing the heaviest losses against a strengthening dollar.

The Fed lifted its benchmark rate roughly six weeks after Chairman Kevin Warsh signalled divisions among policymakers over persistent inflation, which climbed toward 3.4% in August as energy costs surged. The Federal Open Market Committee cited elevated price pressures and firm labour data in justifying the move, breaking with the easing path markets had anticipated earlier in the year.

The dollar index rose to its highest level in months, pressuring the Turkish lira, the Indian rupee, and other currencies reliant on external financing. Turkey's central bank faced added strain as Ankara pursued expanded energy cooperation with Bangladesh, deals that require dollar funding at a time of rising import costs.

Analysts at ING and Capital Economics said the stronger dollar would squeeze emerging-market borrowers and complicate central bank responses across Asia and the Middle East. They warned that further Fed hawkishness could deepen capital outflows from developing economies through the autumn.

A strategist at ING said the repricing was only beginning. "Markets had positioned for cuts, and Warsh has forced a painful reversal that will keep the dollar bid and emerging-market assets under pressure into next week," the strategist said.