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The euro gave up some gains on Thursday with investors closely watching any developments in talks between Russia and Ukraine, while the Federal Reserve's monetary policy decisions failed to affect the market as the bar for a hawkish surprise was high.

The Kremlin said that Russia was putting colossal energy into talks on a possible peace deal with Ukraine. Meanwhile, Ukrainian President Volodymyr Zelenskiy has not altered his position that Ukraine's international borders must be recognised, an adviser said.

The euro was up 0.05% to $1.1034, after rising to a one-week high of $1.1067 earlier in the session.

“What is important for the foreign exchange market is whether the likelihood of an energy crisis decreases, which would be clearly inflationary and relevant to the exchange rate for many reasons,” Commerzbank analysts said.

“A very fragile peace would perhaps only help moderately in this respect,” they added.

Moscow said negotiations with Ukraine resumed on Thursday by videolink for a fourth straight day, discussing military, political and humanitarian issues.

The Russian rouble fell 16% to 105.18 after hitting its highest since Feb. 24 at 88.5 on Wednesday.

The Fed kicked off the move to tighten monetary policy with a quarter-percentage-point increase on Wednesday, while new projections showed policymakers ready to shift their inflation fight into high gear.

"Considering the very hawkish FOMC meeting, yesterday’s market reaction was not particularly impressive, indicating that investors were already pricing in a rather aggressive hiking cycle," Unicredit analysts said.

The dollar index, which measures its strength against six trading currencies, fell 0.2% to 98.325 after hitting a one-week low of 98.151."The U.S. forward curve had already incorporated a heavy degree of tightening before the FOMC meeting, which may slow the intensity of further USD appreciation," they added.

Japan’s yen fell 0.1% to 118.67, within striking distance of its lowest since February 2016, hit on Wednesday at 119.12 as the Bank of Japan (BoJ) ruled out tightening monetary policy.

Japan is unlikely to see inflation hitting a target of 2%, even accounting for rising energy costs, BoJ Governor Haruhiko Kuroda said, making a case for keeping monetary policy ultra-easy at its policy meeting due on Friday.

The pound strengthened against the euro and the dollar while investors await the outcome of the Bank of England policy meeting, with money markets pricing in an about 70% chance of a 50 bps rate hike. [IRPR]

The Australian dollar rose 0.5% to 0.7328 versus the greenback after employment sped past expectations in February as activity recovered surprisingly quickly from an Omicron outbreak.