(Reuters) - The euro reversed early losses and rose to a session high versus the dollar in volatile trade on Wednesday as investors reassessed a policy announcement from the Federal Reserve. The euro rose to $1.2743 on Reuters data and was last trading up 0.3 percent at $1.2722. The Fed said it would extend "Operation Twist," an effort to depress borrowing costs by selling short-term bonds to buy longer-dated ones, a move widely expected by market participants. "The initial read of the Fed statement was somewhat less dovish than many expected because they didn't really hint at any additional QE measures," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "On second look, maybe the market is thinking they are flagging some deflationary risks that we're seeing as well as having left the door wide open to another round of QE if conditions get worse," he said.

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