Dollar Falls as the Fed Keeps Rates at Record Lows

The dollar dropped Tuesday as investors found comfort in the Federal Reserve's slightly upbeat assessment of the economy, while the central bank repeated its pledge to hold interest rates at record lows to help nurture the economic recovery.

Meanwhile, fears about budget deficits in Greece subsided as ratings agency Standard & Poor's took the country off a watch list for a possible downgrade. S&P said Greece's austerity measures were "appropriate" for the country's budget-reduction targets.

The 16-nation euro climbed as high as $1.3778 after the Fed's announcement from $1.3672 late Monday. In late trading in New York, the euro bought $1.3756.

The British pound jumped to $1.5230 from $1.5048, while the dollar edged down to 90.29 Japanese yen from 90.49 yen.

The dollar also fell against most emerging-market currencies in Latin America and Asia, as well as the New Zealand, Australian and Canadian dollars.

The Fed said the job market is stabilizing and that business spending on equipment and software has risen significantly. The Fed said it would keep its benchmark rate near zero for an "extended period."

While the Fed wasn't expected to change its key lending rate, markets were listening closely to its language for a signal that it might lift rates sooner than anticipated.

"Once that event risk was out of the way, (dollar) selling resumed on higher risk appetite," Michael Woolfolk, senior currency strategist at Bank of New York Mellon Corp., wrote in a note to investors.

Also Tuesday, the government said housing construction fell as winter blizzards held down activity in the Northeast and South.

In Europe, finance ministers have said they will help the debt-laden country with loans if necessary, though details on the size and type of aid and when it could be available were not disclosed.

The country's financial troubles have undermined the shared euro currency and raised fears that other indebted governments may face similar difficulties borrowing money.