US dollar index erases most of day's gains after Fed statement

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The euro pared losses versus the dollar on Wednesday after initially extending losses after the release of February's Fed statement. The U.S. dollar index has now erased most of the day's gains in the wake of the decision.

The Fed opted to leave rates unchanged.

Earlier, the U.S. dollar recovered some ground on Wednesday after stronger-than-expected U.S. private payrolls and manufacturing data, while lingering worries that the United States was poised to ditch its "strong dollar" policy limited gains.

The dollar gained as much as 1 percent against the yen, briefly recovering all of Tuesday's losses against the Japanese currency after the ADP National Employment Report showed U.S. private employers added 246,000 jobs in January and the Institute for Supply Management said its index of national factory activity rose to 56.

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The dollar hit a session high of 113.95 a day after tumbling to 112.04 yen, its lowest level since Nov. 30, while the sank more than 0.5 percent to a session low of $1.0737 after touching a more than seven-week high of $1.0811 on Tuesday.

Analysts said the U.S. economic data bolstered expectations that Friday's non-farm payrolls report for January could come in strong, which in turn could encourage the Federal Reserve to follow through with its projected three interest rate increases this year.

"ADP just served as a reminder of America's rosier fundamentals, something that has been pushed off to the side with Washington dominating the spotlight," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The dollar index, which measures the greenback against a basket of six major rivals, rose as much as 0.6 percent to a session high of 100.040 after tumbling to a more than seven-week low of 99.430 on Tuesday and finishing its worst January in three decades.

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The index quickly dipped back below 100, however, as worries lingered over the Trump administration's expected efforts to continue talking down the dollar. The dollar index was last up 0.4 percent at 99.924, recovering less than half of Tuesday's 0.9 percent loss.

"It's extremely clear that this administration wants a weaker dollar," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.