It has been a rollercoaster of an evening for the dollar, which first plummeted and then picked back up again as investors felt uncertain about how to react to the Fed's statement.
Read more: The Federal Reserve keeps interest rates unchanged and gives no hint of when they will rise
With no clear indication of when the US central bank intends to raise interest rates, the initial reaction was to assume the worst, but sentiment has since changed as the Fed's acknowledgement of recent economic gains ignited hopes of a hike before the end of the year.
The dollar has now strengthened against other currencies, currently up 0.3 percent at 123.91 yen, while the euro is down 0.7 percent at $1.0983.
For the time being, interest rates will remain at the near-zero level they have been at since 2008, but the Fed said a fall in employment and increasing jobs showed the economy was “expanding moderately”. I also said it expects inflation to rise towards its target.
The Committee expects inflation to rise gradually toward two per cent over the medium term as the labour market improves further and the transitory effects of earlier declines in energy and import prices dissipate.
Previously, the Fed has stated it will raise rates once it can see a sustained recovery – something further jobs reports and wage data will shed light on between now and September. Analysts had been hoping for confirmation that the rate rise would go ahead three months from now.
US markets reacted positively to the news, with the S&P 500 and Nasdaq composite going up by 0.73 per cent and 0.44 per cent in after-hours trading, respectively.