The greenback fell about 3 percent against the euro, bringing it back above $1.10, in the wake of the Fed’s statement. The euro’s daily gain against the dollar was its largest since March 2009, with trading volume at the highest since February 2012. The euro zone common currency had dropped below a $1.05 for the first time in 12 years earlier this month.
The dollar fell to three week-troughs against the yen and was last at 119.80 yen, down 1.2 percent. It was headed for its worst day versus the yen since Dec.
As expected, the U.S. central bank dropped the word “patient” from its statement in terms of raising interest rates, but lowered its economic and inflation outlook for this year and sharply cut its projected interest rate path for the U.S. economy.
“The message from the Fed is that the economy is not there yet to tolerate an imminent rate hike, which should reduce the chance of the dollar reaching parity against the euro any time soon,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
“The Fed’s cautious tone can go some way in fastening a near-term lid on the greenback. The dollar looks vulnerable now over the short run as markets are likely to use the cautious Fed as an excuse to pare back long dollar positions.”