The U.S dollar extended losses against the EUR on Wednesday after the Federal Reserve upgraded its outlook on the U.S. economy, boosting risk appetite in the market. Given the euro zone's debt problems, the euro has become a proxy for risk appetite, rising when there's positive economic news.

The Federal Reserve gave an upbeat outlook of the U.S. economy in the minutes of the most recent meeting of its policy-setting committee. Data showed the U.S. Consumer Price Index fell for the first time in a year last month and the closely watched core inflation rate eked out its smallest annual gain since 1966, further supporting the Fed's vow to keep interest rates low for some time.