The U.S. dollar declined on Thursday after the short rebound on Wednesday. The traders expect that the Federal Reserve will cut interest rates further, which caused the currency’s downfall. The Fed has already cut rates by 50 basis points this week in an emergency move to save the economy from the effects of coronavirus.
The Fed brought up the epidemic in its latest Beige Book report lots of times. It also stated that policymakers were highly concerned about the economic damage of the disease. Olle Holmgren, the chief strategist at SEB, thinks that the reports in the Beige Book probably will be important for the Fed’s inter-meeting rate cut.
The next meeting is scheduled for March 18-19. The traders contemplate the possibility that Fed will slash another 25 bps cut from the current 1% to 1.25% range for that time and additional a 50 bps cut by April.
Meanwhile, the dollar stays close to the two-month low of 1.1214 it reached versus the Euro on Tuesday, the last trading by 0.4% lower at 1.1175. The Euro, on the other hand, benefited from traders loosening their carry trade positions.
However, some analysts think that the Euro will fall quickly if the virus spreads further in Eurozone. Lee Hardman, the currency analyst at MUFG, stated that despite the currency’s outperformance of late, Euro’s sharp depreciation might follow the outbreak.
What about the Yen?
The yen rose versus the U.S. dollar. The greenback was at last trading against the Japanese currency lower by 0.7% at 106.81, reaching a five-month low.
Coronavirus’ recent cases caused the new wave of panic amidst the traders. China reported a rise in new infections on Thursday, while Italy has closed its schools, and California has declared a state of emergency as cases there increase.
So far, the Bank of England is leaving rates unchanged. Sterling hit a one-week high of $1.2931 and a three-day high versus the Euro of 86.22 pence.