Dollar briefly pares, then extends losses after Fed leaves rates unchanged

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The U.S. dollar briefly pared its early losses, then moved lower again after the Federal Reserve left interest rates unchanged.

Fed policymakers, however, made no direct indication that a rate increase is coming at the December meeting, a move that the market is strongly anticipating. In fact, the dovish FOMC majority gained a vote.

Earlier Wednesday, the dollar hit its lowest level in more than three weeks against the euro, , Swiss franc and sterling on Wednesday on continued nervousness about a potential victory for U.S. Republican presidential candidate Donald Trump next week.

Investors are rethinking long-held bets on a Nov. 8 victory for Democrat Hillary Clinton. Clinton held a 5 percentage point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, but some other polls showed her Republican rival ahead by 1-2 percentage points.

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, which measures the greenback against a basket of six major rivals, declined to 97.34. The Mexican peso fell against the greenback of 19.3982 pesos per dollar on fears of a Donald Trump victory.

Markets' assumption in the past month has been that the dollar would fall if Trump won. Clinton is viewed as the candidate of the status quo, while there is greater uncertainty over what a Trump victory might mean for U.S. foreign policy, international trade and the domestic economy.

"There is a huge amount of unknown unknowns around Trump," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York. "That uncertainty is obviously anathema to markets."

The euro rose against the dollar to $1.1108. The dollar sank against the yen to 103.27 yen. The dollar dropped against the Swiss franc to 0.9725 franc.

The Mexican peso suffered a more than 1-percent drop against the dollar for a second straight day. A possible Trump victory has been viewed as a key risk for the Mexican currency given the candidate's promises to clamp down on immigration and rethink trade relations.


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"People are pricing in higher odds" of a Trump victory, said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.

CNBC contributed to this report.