FOREX-Dollar drops as Fed to keep rates low for some time

* Fed to keep rates low for some time, weighs on dollar

* Investors remain cautious about U.S. outlook (Recasts, updates prices, adds comment, Fed decision; changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 4 (Reuters) - The dollar fell in choppy trading against the euro on Wednesday after the Federal Reserve left interest rates steady, as expected, and said it intends to keep interest rates low for some time.

Low interest rates should ensure that the dollar will remain a funding currency in carry trades, or transactions in which investors borrow in dollars to buy higher-yielding assets.

Investors, however, remained cautious about selling the dollar too much. The Fed said in its statement that while economic activity has picked up, consumer spending has remained constrained by job losses and tight credit.

For Fed statement, click on [ID:nTRU000422].

The euro EUR= rose as high $1.4906, but came all the way down to $1.4828. It was last at $1.4890, up more than 1.0 percent on the day. Against the yen, the dollar was up 0.7 percent at 90.98 yen JPY=.

"What happened here initially is obviously this knee-jerk reaction where people think low rates for a while should keep the dollar weak," said Greg Salvaggio, senior vice president for capital markets at Tempus Consulting in Washington/