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Dollar extends losses after Fed leaves rates unchanged

Dan Kitwood | Getty Images

The dollar added to earlier losses on Wednesday after the Federal Reserve left interest rates unchanged, as was widely expected.

The safe-haven yen and Swiss franc lost some ground as concerns over Britain's referendum on its European Union membership eased.

The U.S. central bank concludes a two-day Federal Open Market Committee meeting later on Wednesday, with Fed Chair Janet Yellen expected to strike a balanced tone, keeping rate hikes in the coming months in play but possibly flagging "Brexit" risks as well.

"No doubt Ms. Yellen and company will make references to the current turbulence caused by the Brexit vote as part of the reason for their cautious approach," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

"But if they look past this event and suggest that the U.S. economy continues to expand at a healthy pace, the market expectations for a Fed hike in July may increase markedly especially if next month's NFPs (non-farm payrolls) show a rebound in jobs."

Brexit concerns loom

A poll gave Britain's "remain" camp a marginal lead ahead of the June 23 referendum on whether to remain in the European Union or leave, although the issue is almost certain to keep markets cautious up to the last minute.

The rebound in risk appetite helped European stocks snap a five-day losing streak and gave China's stock market its biggest gains in two weeks despite MSCI deciding not to add mainland shares to one of its benchmark indexes.

The safe-haven Swiss franc and the euro had fallen to a near six-month low, when worries about a Brexit and its impact on the euro zone economy drove investors to the relative safety of the Swiss currency and Japan's yen.

Yuan appears to be on depreciation path: Pro

The BOJ, meanwhile, will announce its policy decision on Thursday, with a recent spike in the yen adding to headaches for policymakers. While most in the market expect an easing in July, some traders said the sharp yen gains could force the central bank's hand this week.

The euro rose to $1.1294 after weakening on Tuesday to an 11-day low of $1.1189.