Forexpros - The U.S. dollar rebounded from losses against its major counterparts Tuesday, as the Federal Reserve decision to leave interest rates at historic lows for the next two years added fuel to fears of further weakness in the U.S. economic recovery.
In early Asian trade, the greenback was higher against the euro, with EUR/USD falling 0.02% to hit 1.4372.
In the Federal Open Market Committee's Tuesday meeting, the U.S. Central Bank voted to extend ultra-low interest rates at 0.25% until at least the middle of 2013, citing concerns on the prospects for growth in the U.S. economy.
Short-term treasury bonds fell to record lows, as investors forecast a return to the bond market for the Fed after less than a month of absence from its last big program of purchases.
The Federal Reserve said it expected a much slower pace of recovery than what was forecast during its last meeting in late June. It added that the unemployment rate was forecast to fall only gradually from the July level of 9.1%, and that "Downside risks to the economic outlook have increased."
The Swiss franc surged more than 5% against the U.S. dollar in afternoon trade as dealers continued to seek safe currency havens.
Wall Street shares briefly sagged following the Federal Reserve's statement but bounced back strongly from Monday's 6.5% plunge, the sixth worst performance ever for U.S. stocks.
By the end of Tuesday trade, the Dow Jones Industrial Average rose 3.98% to 11,239.77, the Nasdaq Composite Index added 5.3% to 2,482.52, and the S&P 500 jumped 4.74% to 1,172.53.
The greenback was up against the British pound, with GBP/USD slipping 0.06% to 1.6304.
The dollar picked up ground against both the yen and the Swiss franc with USD/JPY rising 0.08% to hit 77.03, and USD/CHF higher by 0.22% to hit 0.7228.
The greenback was mixed against its Canadian, Australian and New Zealand counterparts with USD/CAD up 0.126% to hit 0.9795, AUD/USD up 0.05% to hit 1.0360, and NZD/USD down by 0.05% to hit 0.8369.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.05% at 74.00.
The U.S. Federal Reserve was scheduled to hold its next meeting August 26, at the central bank's policy retreat in Jackson Hole, Wyoming.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.