VS Code terminal (selected) text background color

There is a new setting coming soon, presumably in Stable v1.68. See commit for terminal selection colors.

  "workbench.colorCustomizations": {

    "terminal.selectionBackground": "#dededc",
    "terminal.selectionForeground": "#ff0000"     // new in v1.68
  }

"terminal.selectionBackground": #ffee7f6e is the setting used to control the highlight color for the vscode built in terminal. There is no foreground option so you'll need to use a value with some opacity.

Example settings.json

{
    "workbench.colorCustomizations": {
        "terminal.selectionBackground": "#ffee7f6e"
    }
}

I had the same problem after updating Windows. I think that the problem is related to Windows PowerShell, because after updating, I changed the terminal to cmd.exe, and the problem went away.

Then I opened PowerShell and changed the settings. I think that my problem has been solved.

seems that changing the settings in cmd also works

Use these options inside workbench.colorCustomizations:

"terminal.foreground": "#ffffff",
"terminal.ansiBlack": "#000000",
"terminal.ansiRed": "#c23621",
"terminal.ansiGreen": "#25bc24",
"terminal.ansiYellow": "#adad27",
"terminal.ansiBlue": "#492ee1",
"terminal.ansiMagenta": "#d338d3",
"terminal.ansiCyan": "#33bbc8",
"terminal.ansiWhite": "#cbcccd",
"terminal.ansiBrightBlack": "#818383",
"terminal.ansiBrightRed": "#fc391f",
"terminal.ansiBrightGreen": "#31e722",
"terminal.ansiBrightYellow": "#eaec23",
"terminal.ansiBrightBlue": "#5833ff",
"terminal.ansiBrightMagenta": "#f935f8",
"terminal.ansiBrightCyan": "#14f0f0",
"terminal.ansiBrightWhite": "#e9ebeb",

HERE is more info about color customization in Visual Studio Code.

You should avoid using any background settings as they interfere with some theme's background settings for terminal panel (VSCode 1.21.1).