(Rewrites with reaction to Fed statement, new throughout)
* Fed holds rates unchanged, repeats it is patient on policy
* Dollar holds position, up modestly against euro, Swiss franc
* U.S. dollar index gains but still off 11-year highs
* Greek politics a drag for the euro
* New Zealand dollar drops to near four-year low
By Daniel Bases
NEW YORK, Jan 28 (Reuters) – The U.S. dollar strengthened on Wednesday in a broad advance that included gains against the euro and the Swiss franc, taking in stride the Federal Reserve’s repeated message it remains “patient” in deciding when to raise interest rates.
Market expectations the Fed would stay the course toward increasing rates underpins the dollar’s rally versus its European and Asian counterparts where policy is being loosened in a bid to spur economic growth.
Economists are expecting a U.S. rate increase sometime in mid-2015 while prices in the futures market point toward the later months of the year.
The Fed said the U.S. economy is on track for continued expansion, but did acknowledge inflation had dropped further below its longer-run objective.
“I don’t think there is a big catalyst here for the dollar. Overall, markets have run with the long dollar position and I don’t think this is likely to throw dollar bulls off course,” said Vassili Serebriakov, currency strategist at BNP Paribas in New York.
“We don’t get any additional information in terms of forecast or press conference and the language was not a surprise. So far the reaction has been muted and reflects the lack of surprises,” he said.
The U.S. dollar index edged up to session highs after the Fed’s statement, gaining 0.56 percent on the day to 94.551, below Friday’s 11-year high.
The euro slumped to session lows, off 0.82 percent to $ 1.12865 on the EBS trading platform. The euro fell 0.36 percent to 1.0234 Swiss francs while the greenback traded up 0.49 percent to 0.9070 franc.
A secondary drag on the euro was tough talk from Greece’s new anti-austerity government over its 240 billion euro bailout plan.
“I think the dollar is still the cleanest shirt in the hamper but the Greece situation is not going away. Until that is resolved, and ultimately I do think they stay in the euro zone, it will create a better situation for the dollar,” said John Canally, investment strategist and economist at LPL Financial in Boston.
Eurasia Group, while maintaining a Greek exit from the euro zone is unlikely, nevertheless increased chances to 15 percent from 5 percent on Wednesday.
The dollar’s one blemish was a loss of 0.26 percent to 117.54 yen.
New Zealand’s dollar fell to a near four-year low of $ 0.7328 versus the U.S. dollar after the country’s central bank said it expects to keep rates on hold for some time with the next move either up or down depending on economic data.
(Additional reporting by Ian Chua in Sydney; Editing by James Dalgleish)