Dollar plunges after Fed meeting

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NEW YORK (CNNMoney.com) -- The U.S. dollar plummeted Wednesday, hitting a 2-month low against the euro, after the Federal Reserve said it would take aggressive actions to stimulate the economy.

The dollar was trading down against the euro, which rose 3.2% to $1.342 in New York after the Fed released its statement. The euro hasn't traded above $1.34 since January.

The central bank said Wednesday that it would buy up to $300 billion in long term treasurys, as well as an additional $750 billion in mortgage-backed securities in order to stabilize the economy. The Fed also maintained its near-zero interest rate policy.

The Fed's action was aggressive and came as a big surprise to investors, according to Marc Chandler, global head of currency strategy for investment firm Brown Brothers Harriman.

"For the first time that I can think of, policy makers have gotten ahead of the curve," said Chandler.

Kathy Lien, director of currency research for Global Forex Trading agreed. "No one expected (Fed Chairman) Bernanke to announce this in March," she said. "It really reflects the Fed's pro-active actions."

The Federal Reserve will need to print more money in order to purchase the treasurys, which will create more liquidity, according to Lien.

"A weaker dollar is needed to stimulate the U.S. economy," she said.

The dollar also lost ground against other currencies such as the Japanese yen as the Fed's announcement reignited a string of rallies in the global equity markets. The dollar plummeted 2.33% to ¥96.29 in afternoon trading.