New York, March 18 

 Oil prices extended the rally as declining dollar made the dollar-priced crude less expensive and more attractive for buyers holding other currencies.

The West Texas Intermediate for April delivery on Thursday moved up $1.74 to settle at $40.2 a barrel on the New York Mercantile Exchange, while Brent crude for May delivery increased $1.21 to close at $41.54 a barrel on the London ICE Futures Exchange, Xinhua news agency reported.

US dollar decreased against other major currencies on Thursday as the Federal Reserve statement released Wednesday proved dovish.

The declining output from US also buoyed the market. Crude production of the country lost 10,000 to 9.068 million barrels a day last week, according to the weekly report of the Energy Information Administration (EIA) released Wednesday.

US crude stockpiles increased less than expected. Crude supplies last week gained 1.3 million barrels to 523.2 million barrels

US dollar declines after Fed statement

The US dollar decreased against other major currencies as investors were digesting the Federal Reserve policy statement.

In late New York trading on Thursday, the euro rose to $1.1318 from $1.1183 of the previous session, and the British pound climbed to $1.4486 from $1.4230. The Australian dollar went up to $0.7651 from $0.7526.

The dollar bought 111.43 Japanese yen, lower than 112.91 yen of the previous session. 

The dollar decreased to 0.9672 Swiss francs from 0.9812 Swiss francs, and it inched down to 1.2996 Canadian dollars from 1.3192 Canadian dollars. 

The dollar index, which measures the greenback against six major peers, was down 1.17 percent at 94.764 in late trading on Thursday.

In a statement released after the Fed's two-day monetary policy meeting on Wednesday, Fed officials maintained the target range for the federal funds rate at 0.25 to 0.5 percent, noting that "global economic and financial developments continue to pose risks" to the U.S. economy.

"In determining the timing and size of future adjustments to the target range for the federal funds rate," the central bank "will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation," according to the statement.

On the economic front, in the week ending March 12, the advance figure for seasonally adjusted initial claims was 265,000, an increase of 7,000 from the previous week's revised level, the US Labor Department announced on Thursday.