The U.S. dollar backed off against the euro Wednesday after the U.S. Federal Reserve raised its key interest rate and traders waited to see whether the European Central Bank would follow suit. The euro rose to US$1.2948 from US$1.2862 in New York late Tuesday. In Britain, where national elections are scheduled for Thursday, the pound rose to US$1.8938 from US$1.8893. The dollar bought 104.53 Japanese yen, down from 105.13 yen. Japanese markets are closed from Tuesday to Thursday for national holidays. Traders said the dollar was under selling pressure because the Fed failed to express the more hawkish sentiments that some had hoped for. Although it raised the federal funds rate by one-quarter point to 3 percent, and admitted that the U.S. recovery had lost some strength, it said inflation pressures were "contained" and didn't show signs of acceleration. The widely expected U.S. rate increase was the eighth since June 2004, when the Fed began its campaign to tighten credit. On Wednesday, the European Central Bank was holding its monthly meeting to set interest rates for the 12 countries that use the euro. Analysts expected the ECB to leave its key refinancing rate at 2 percent, where it has stood for nearly two years.