Dollar holds gains vs. euro

The Fed likes 2%

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NEW YORK (CNNMoney.com) -- The dollar remained at its highest level in nearly seven weeks against the 15-country euro Tuesday after the Federal Reserve's decision to hold a key interest rate at 2%, although the U.S. currency edged off its highs.

The central bank suggested, in its accompanying statement, that while risks remain, it would likely stand pat on rates for the next few months. It is the second straight meeting that policymakers at the Fed held the rate at 2%, following seven cuts from last September through this April.

The euro bought $1.5465 shortly after the announcement, down from $1.5578 late Monday. Earlier in the day, the euro bought $1.5460.

The dollar edged lower against the yen, slipping to ¥108.19 from ¥108.32 late Monday. The greenback briefly popped higher in the minutes following the Fed announcement before resuming its downward trend.

Terri Belkas, a currency strategist with DailyFX.com, said the Fed's statement may lead to a weaker dollar.

"The markets were pricing in rate hikes over next year, but since the Fed says they'll leave rates steady going forward, this will contribute to some weakness in the U.S. dollar," said Terri Belkas, a currency strategist with DailyFX.com.

Sacha Tihanyi, a currency strategist at Scotia Capital, said the market's "knee jerk" reaction to the Fed's statement was a weakening in the dollar. However, he thinks the dollar will maintain its weeks-long run against the euro until Thursday, when the European Central Bank issues its interest rate decision.

"The dollar has had some momentum to it and the Fed's statement hasn't taken a big bite out of the momentum. It's business as usual until ECB on Thursday, that's where markets are going to be taking their next cue from," Tihanyi said.

Bonds: The benchmark 10-year note fell 6/32 to 99 4/32 and its yield rose to 3.99%. The 2-year note fell 1/32 to 100 12/32 and yielded 2.56%. The 30-year long bond fell 20/32 to 96 10/32, with the yield rising to 4.60%. (Full story)

Oil: Oil prices fell to near $119 a barrel Tuesday - the lowest settle price in more than three months. (Full story)

Stocks: The Dow Jones industrial average rose more than 300 points and the broader Standard & Poor's 500 index was up 2.7%, with an hour to go in the session. The tech-heavy Nasdaq composite index advanced 2.7%. (Full story)