Dollar Dives vs. Euro after U.S. Growth Disappoints

The dollar sank against the euro Wednesday after worse-than-expected data showed the U.S. economy nearly stalled in the first quarter, clouding expectations of a Federal Reserve interest rate hike.

The early morning report from the Commerce Department sent the dollar tumbling against the 19-nation currency, at one point hitting a two-month low.

But the dollar pared its losses after the Federal Reserve announced, after a two-day policy meeting, that the slowdown in the world's largest economy was "in part" due to transitory factors, predicting that growth would return to a "moderate pace".

The euro traded at $1.1128 around 2100 GMT, up from $1.0981 late Tuesday.

As expected, the Federal Open Market Committee left its key federal funds rate near zero, but after previously hinting the rate hike could come in mid-2015, the FOMC statement left open the timing of an increase as it waits for more signs of economic progress.

"This report is dovish for the greenback and the yield curve, but supportive of U.S. growth, job gains, oil prices, metals prices, and equity prices on trend.  Higher rates are coming, but we do not expect the first moves higher until Q4 2015," said Jason Schenker of Prestige Economics.