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Yen and euro fall against dollar on Fed taper, Yellen's remarks

The dollar rose against the yen and euro on Wednesday, the announcement the Federal Reserve will look beyond the impact on the U.S. economy of a harsh winter and further unwind its monetary stimulus.

The Fed announced it will reduce its monthly bond purchase program by a further $10 billion at the end of its two-day meeting.

Many in markets had expected the Fed to amend its forward guidance on policy, assuring investors that interest rate hikes remain distant despite unemployment easing faster than expected.

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The dollar edged up to 102.52 yen, staying above a one-month low of 101.20 yen hit on March 3.

The euro fetched around $1.38, down more than 0.1 percent on the day.

The Fed had previously said it would not raise rates until joblessness falls to at least 6.5 percent, a pledge policymakers thought would hold until at least mid-2015. But it hit a five-year low of 6.6 percent in January, before rising to 6.7 percent in February.

Expectations Yellen would pursue a broadly dovish stance have helped rein in U.S. Treasury yields and this, in turn, has undermined the attraction of the dollar for investors.

The U.S. dollar, though, hit its highest in a month against the Canadian dollar just under C$1.12. Selling in the currency gathered pace after Bank of Canada Governor Stephen Poloz said on Tuesday Canada could face a prolonged period of sluggish growth and lower interest rates.

Focus on Sterling

Sterling was trading just above $1.65, after rebounding to around 1.66 from a one-month low struck on Tuesday.

The number of Britons claiming jobless benefits fell more than expected while wages rose 1.4 percent year-on-year, which though higher than forecast was still below inflation.

Finance minister George Osborne, due to present the UK annual budget later on Wednesday, is expected to stick to his plan to fix the public finances. This will keep the onus on the Bank of England to keep monetary policy loose to ensure growth.

And while the safe-haven yen lost ground, investors remained cautious over tensions in Ukraine. Anxiety eased somewhat after Russian President Vladimir Putin said on Tuesday he did not plan to seize other regions of Ukraine, a day after Crimean citizens voted to be annexed by Moscow.

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—By CNBC with Reuters

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