Investing.com – The U.S. dollar dropped against its major counterparts on Wednesday, as the Federal Reserve pledged to hold its target for the federal funds rate at zero to 0.25% creating a "highly accommodative" monetary policy until late 2014.
During late session U.S. trade, the dollar slipped lower against the euro, with EUR/USD gaining 0.16% to hit 1.3058.
The Fed had pledged to keep its target rate in place until mid 2013. However, it has now moved this date until late 2014 resulting in the greenback's weakness.
Brian Dolan at Forex.com told Bloomberg, "Late 2014 is much longer than the market had expected, that's why we are seeing a negative dollar reaction. They are assuring market rates will remain low and spurring some economic gains."
Traders are awaiting Bernanke's press conference later in the day, when forecasts for the main interest rate will be revealed for the first time.
However, Greece continues to lead the bearish worries in the euro zone. Yesterday, hopes were dashed of a last minute bond deal to avoid default when officials rejected a final offer.
Reports of the European Central Bank being opposed to restructuring its Greek holdings added to the tension.
Euro bullish data from Germany indicating improved business confidence helped support the single currency.
In the U.S. data showed that pending home sales fell more than expected last month, after climbing to a 19 month high in November.
A report showing that business confidence had improved more than expected in January worked to lift the euro.
The greenback traded higher against the pound, with GBP/USD falling 0.02% to hit 1.5623
The U.K. economy shrank in the fourth quarter more than economists had forecast. Manufacturing cut output and the service sector slowed, pushing Britain to the edge of recession.
Earlier, the Bank of England voted to keep their bond purchase target unchanged with some officials saying more stimuli is likely to be needed after the current program winds down.
Elsewhere, the greenback was higher against the yen but lower against the Swiss franc with USD/JPY gaining 0.25% to 77.86 and USD/CHF falling 0.34% to hit 0.9246.
Earlier, Japan posted its first trade deficit in 31 years for 2011, however the Bank of Japan stated that exports are likely to increase as worldwide recovery takes hold.
.In addition the greenback was lower against its Canadian, Australian and New Zealand counterparts with USD/CAD falling 0.23% to hit 1.0067, AUD/USD climbing 0.72% to hit 1.0570 and NZD/USD adding 0.23% to 0.8138.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gave back 0.32% to hit 79.74.
In other news, the World Economic Forum began its annual five day meeting in Davos, Switzerland today.