NEW YORK: The dollar dropped Wednesday after the Federal Reserve left US interest rates at rock-bottom lows and chairman Ben Bernanke said debt was the country's leading long-term problem.
The euro traded at $1.4785 around 2100 GMT, up sharply from $1.4636 at the same time Tuesday.
Against the Japanese currency, however, the dollar firmed to 82.15 yen from 81.55 yen Tuesday. The yen weakened after ratings agency Standard & Poor's lowered its outlook on Japan's sovereign debt following the March 11 earthquake disaster.
The euro has been benefiting from the European Central Bank's recent interest rate hike and speculation that further monetary tightening is on the way.
The single European currency earlier in the day peaked at $1.4795, its highest level since December 7, 2009.
But the dollar came under fresh pressure from the Fed's decision to hold its key interest rate at 0-0.25 percent ‘for an extended period.’
Though widely anticipated, the US rate decision reinforced recent market bias toward the euro as investors seek higher returns.
The policy-setting Federal Open Market Committee (FOMC) also signaled it would maintain its $600 billion stimulus program through June as originally planned.
Still, it left open the possibility of keeping bond investments under the program steady at $600 billion, rather than let them decline as the assets mature.
The dollar fell sharply against the euro as Bernanke reiterated the economy's weaknesses and need for low rates despite rising inflation, in a first-ever press conference following an FOMC meeting.
By the end of Bernanke's one-hour briefing with journalists, the euro was at $1.475, compared with the average level of about $1.467 during the morning.
Bernanke told reporters that the massive US debt load was a huge burden for the struggling economy.
‘It's the most important economic problem, at least in the longer term, that the United States faces,’ he said.
Bernanke's remarks ‘provided no relief for the battered dollar which continued to fall in the final hours of North American trade,’ said Michael Boutros at DailyFX.com.
‘With the Fed's commitment to the completion of QE2 and no change to the 'extended period' language as it pertains to interest rates, the dollar's woes continued to mount.’
In late New York trade against the Swiss franc, the dollar fell to 0.8744 francs from 0.8754 late Tuesday.
The pound surged to $1.6626 from $1.6474 a day earlier.
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