The dollar slipped back from three-week highs against the yen on Thursday, quickly erasing gains made after the Federal Reserve took a slightly more hawkish policy tone in signalling two more rate hikes by year-end thanks to a solid outlook for the world's biggest economy.
The greenback's bounce faded as traders booked profits before the European Central Bank's meeting later Thursday, where policy makers are seen discussing the timing of winding down the ECB's 2.55-trillion-euro (£2.24 trillion) bond-purchase programme.
The dollar last traded at 110.20 yen, down slightly on the day, having lost steam after hitting a three-week peak of 110.85 shortly after the release of the Fed’s latest policy statement.
The euro was almost flat at $1.1797, bouncing back from $1.1725 hit after the Fed’s decision and edging near last week’s high of $1.1840.
As widely expected, the Fed lifted key overnight borrowing costs by a quarter percentage point for a second time this year, to between 1.75 and 2.00 percent.
The initial market reaction to the slightly more hawkish Fed tone quickly faded off, with the focus shifting to the ECB’s policy review later in the global day.
Although the ECB is widely expected to stand pat this month, some traders speculate it may offer clues on its intentions to begin tapering its bond purchases this year. Others reckon the policy makers may refrain from signalling changes to ECB’s stimulus programme given Italy’s political plight and a recent spate of disappointing data in the euro zone.