By Dion Rabouin

NEW YORK (Reuters) - The dollar fell to its lowest level in 10 days against a basket of major currencies on Thursday, a day after the Federal Reserve cut its longer-term interest rate expectations.

The U.S. central bank's policy-setting committee left its target rate for overnight lending unchanged at the end of its two-day meeting on Wednesday. It also projected a less aggressive rise in rates next year and in 2018, and cut its longer-run interest rate forecast to 2.9 percent from 3.0 percent.

That knocked the dollar almost across the board as investors reduced their expectations for U.S. interest rates.

"On one hand the Fed looks like it will raise rates in December ... and on the surface that's somewhat hawkish and positive for the dollar, but at the same time the Fed lowered its longer-term projected path of interest rates," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

"It's hard to get too excited about the dollar when the Fed is lowering its projected path of rate hikes into the future."

Higher interest rates make currencies more attractive to investors.

The dollar index <.DXY> fell to 95.048, its lowest point since Sept. 12. It rebounded slightly in afternoon trading, gaining largely against the euro and was last down 0.25 percent at 95.426.

Earlier, the euro <EUR=> touched its highest level against the dollar in nearly a week at $1.1250. It was last up 0.15 percent at $1.1202.

The dollar hit a two-week low against the Swiss franc <CHF=>, falling to 0.9663 franc.

Oil prices rose for the second straight day thanks in part to a surprisingly large drop in U.S. crude inventories, pushing oil-linked currencies like the Canadian dollar <CAD=>, Colombian peso <COP=> and Russian rouble <RUB=> higher.

Those currencies also benefited from risk-on sentiment bolstered by the Fed's apparent lower interest rate path, analysts said.

The dollar hit its lowest level against the loonie and peso in nearly two weeks and its lowest level against the rouble since Aug. 18.

The major gainer against the dollar was the Norwegian crown <NOK=>, which rose more than 2 percent after Norway's central bank left its main interest rate unchanged and suggested further rate cuts may not be needed because of a pickup in the economy.

That move came despite reports on Wednesday that the country's unemployment rate rose to its highest level in 20 years.

(Reporting by Dion Rabouin; Editing by Meredith Mazzilli and Paul Simao)