European stocks rallied Thursday and the euro hit a one-month dollar high after the Fed vowed to keep interest rates near zero for at least the next two years and investors waited on Greek debt talks.
The European single currency surged as high as $1.3177 in afternoon trading despite Greece's ongoing struggle to agree a writedown on its huge debts with its creditors, its highest level since December 21.
The euro later pulled back to stand at $1.3160 at 1400 GMT, still up from $1.3103 late in New York on Wednesday.
The US Federal Reserve said Wednesday that it expects interest rates to stay at "exceptionally low levels" at least until late 2014, extending its forecast from the previously stated mid-2013.
Traders also speculated that the central bank could also decide to implement another round of stimulus in the form of quantitative easing (QE).
"Yesterday's news from the Fed pushing out the low interest rate target to 2014 has delivered a modicum of support in early European trade, with the FTSE nudging its way higher as a result," said analyst Mike McCudden at online brokerage Interactive Investor.
"There's also a growing expectation that we'll see QE3 emerging from the Fed too, although with the market clearly supported by this line, any signs of delay could well initiate another round of broad-based selling.
"Eurozone debt concerns also remain very much front of mind and any hint of deterioration here could again see risk appetite plummet amongst investors."
Markets have been on a generally upward arc since the beginning of the year as the US economy shows tentative signs of recovery while officials in Europe strive to solve their debt crisis - AFP