NEW YORK, July 1: The dollar fell sharply on Friday, still reeling a day after the US Federal Reserve raised key lending rates but hinted at a pause in the central bank's series of rate hikes.

The euro jumped to $1.2789 from 1.2656 dollars late on Thursday in New York.

The dollar sank to 114.44 yen from 115.14 yen on Thursday.

Markets were still digesting Thursday's action by the Federal Reserve, which increased its base rate by a quarter point to 5.25 per cent, as expected, but offered a less hawkish tone about future actions.

The Fed action sent dollar bulls stampeding for the exits, said Boris Schlossberg, an analyst at Forex Capital Markets, who added that market sentiment made a major shift away from the greenback.

The dollar's recent gains have been linked to hawkish comments from Federal Reserve members that led market players to believe rates would go significatly higher, making dollar-based investments more attractive.

But now traders are shifting expectations.—AFP