The dollar gained on the euro and pared losses against the yen on Wednesday after Federal Reserve Chair Jerome Powell said that a rate cut in March was not the U.S. central bank's "base case."
It came after the Fed offered a neutral and less dovish outlook on rates than many investors had expected.
The Fed gave an "extremely neutral, non-committal statement", said Karl Schamotta, chief market strategist at Corpay in Toronto.
The U.S. central bank left interest rates unchanged and dropped a longstanding reference to possible further hikes in borrowing costs. But it gave no hint that a rate cut was imminent.
"Traders thought that with the shift in the bias towards neutral that the Fed would accompany this pivot with dovish language. But the Fed did not. If anything, the Fed added some hawkish language in the text," said Thierry Albert Wizman, global FX and rates strategist at Macquarie in New York.
Fed Chair Jerome Powell said in a press conference that the Fed would need to see more favorable data to be sure it was time to lower rates. "We do have confidence but we want to get greater confidence" that cooling inflation data was sending "a true signal", he said.
The dollar index was last up 0.2% on the day at 103.36. It is on track for a 2.3% gain this month, the best month since September.
Traders are now pricing in a 38% probability that the Fed will cut rates in March, down from 59% earlier on Wednesday. It has fallen from 89% a month ago.