The dollar dropped broadly on Thursday, nearing a three-week low against the euro, after the Federal Reserve held interest rates at 2 percent, dashing expectations of an imminent rate hike.

In contrast with the interest rate differential outlooks between U.S. Federal reserve and European Central Bank in coming months this year, the single currency rose to near a three-week high at 1.5768 against the dollar on Wednesday. The euro also climbed to a record high at 169.47 versus the Japanese yen before tumbling to 168.01 due to risk aversion on the back of sliding in stocks’ market.

On the other side, fresh concerns about the U.S. banking sector and a sharp slide in U.S. stocks also weighed on the greenback. The Dow Jones industrial average index fell 358 points to 11453.42 and closed at the day-low, which it the lowest level since October 2006. Dollar weakens and dropped to a session low at 106.61 versus the Japanese yen just before the New York closing.

Cable climbed to 1.9895 (the highest since May 2) in the session earlier after King said in testimony before a parliamentary committee that U.K. inflation will probably exceed 4 percent in the coming months, whist the Swiss franc strengthened to 1.0220 against the dollar.

Elsewhere, crude oil jumped above $140 a barrel to a record as Libya threatened to cut production and the Organization of Petroleum Exporting Countries' president said prices may reach $170 by the summer. Investors buy commodities as a hedge against the dollar when inflation erodes the value of the U.S. currency.

Futures on the Chicago Board of Trade showed the chance of the Fed increasing the target rate for overnight lending at its next meeting on Aug. 5 fell to 22 percent, from 36 percent yesterday and 44 percent a week ago. The balance of bets was on no rate change.

On Friday, economic data releases include New Zealand GDP and trade data, Japan’s unemployment rate, household spending, Tokyo and National CPI, industrial production and retails sales, eurozone’s current account, U.K.’s GDP data and current account, Switzerland’s KOF indicator, Canada’s PPI data, U.S.’s PCE data, personal income and spending, and University of Michigan survey.