Investing.com - The euro fell almost 2% against the dollar on Thursday, giving up most of the gains from the previous session, when the dollar turned sharply lower after the Federal Reserve struck a more dovish tone than expected on interest rates.
EUR/USD dropped 1.96% to 1.0654, after rallying to highs of 1.1041 in the wake of Wednesday’s Fed statement, well off Friday’s 12-year trough of 1.0461.
The dollar initially sold off after the Fed downgraded its forecasts for growth and inflation and lowered its interest rate projections after Wednesday’s policy meeting.
The Fed dropped a reference to being "patient" on the timing of rate hikes, but added that the change in its forward guidance did not mean it has decided on the timing for an initial rate increase.
The statement prompted investors to push back expectations on the timing and pace of future rate increases.
Fed Chair Janet Yellen also warned that the stronger dollar was acting as a drag on U.S. exports and was pushing down inflation.
But the dollar rebounded on Thursday as markets digested the Fed statement.
The greenback received an additional boost after official data showed that U.S. initial jobless claims rose only modestly last week, indicating that the recovery in the labor market remains on a strong footing.
The Department of Labor said the number of people filing for initial jobless benefits rose by 1,000 to 291,000, broadly in line with market expectations.
Sentiment on the single currency was hit ahead of European Union talks to discuss Greece’s bailout later in the day.
Ahead of the talks, European Parliament President Martin Schulz warned that Greece’s financial situation was “dangerous”, with debt payments looming.
Elsewhere, EUR/JPY dropped 1.42% to 128.66, while EUR/GBP was down 0.65% to 0.7206.
USD/JPY added 0.59% to trade at 120.81, recovering from overnight lows of 119.28.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 2.1% to 99.42, off Wednesday’s three-week lows of 94.77.