Dollar falls to new 1-year low versus euro after Fed announces recovering economy

Shortly after the Federal Reserve’s announcement Wednesday that the U.S. economy was recovering, the dollar fell to a new one-year low against the euro and dropped against the yen.

As was widely expected, The Fed held overnight lending rates at close to zero percent and restated its intention to keep rates exceptionally low for an extended period.

In a statement following its two-day meeting, the U.S. central bank said the economy was in recovery after a severe downturn and therefore would gradually slow the pace of its purchases of mortgage-related debt in order to promote a smooth transition.

“This continues the theory of ‘green shoots,’ which should still lead to risk taking and that should definitely benefit the euro,” said Dan Cook, senior market analyst at IG Markets in Chicago. “We didn’t get anything from them today that will change direction.”

The euro rose as high as $1.4842, according to Reuters, its highest level since September 2008. It last traded up 0.2 percent at $1.4810.

Against the yen, the dollar reversed earlier gains to trade 0.1 percent lower at 91.04 yen.

The dollar index .DXY, which measures the dollar against six other major currencies, was 0.2 percent lower at 75.981, after falling to its lowest since August 11, 2008.

“We just see some fine-tuning of the economic outlook,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. “And now that the risk of the Fed meeting has passed, people are comfortable returning to the trend of selling the dollar. That’s the bottom line.”