Yen gained against the U.S. Dollar, while Sterling soared

The yen rose against the U.S. dollar recently. The greenback reached a five-month low versus the Japanese currency, last trading lower by 0.7% at 106.81.

Meanwhile, China reported a rise in new infections on Thursday. Italy closed its schools and restricted the rules to prevent the disease. California also declared a state of emergency as cases there increase. The recent wave and rise in coronavirus cases caused panic amidst the traders.

The sterling hit a one-week high of $1.2931 and a three-day high versus the euro of 86.22 pence. The Bank of England is leaving rates unchanged so far.

U.S. dollar fell after rallying for a short time

The dollar was close to the two-month low of 1.1214 it reached versus the euro on Tuesday, the last trading was 0.4% lower at 1.1175. It declined on Thursday after the short rebound on Wednesday.

The Fed cut rates by 50 basis points this week in an emergency move to save the economy from the effects of the coronavirus. The traders expect that the Federal Reserve will cut interest rates further, which caused the dollar’s downfall.

Policymakers are highly concerned about the economic damage of the coronavirus – stated the Fed. According to Olle Holmgren, the chief strategist at SEB, the reports in the Beige Book probably will be important for the Fed’s inter-meeting rate cut.

The traders speculate that Fed will slash another 25 bps cut from the current 1% to 1.25% range in March and added a 50 bps cut by April. The next meeting is scheduled for March 18-19.

While the dollar lowered, the euro benefited from traders loosening their carry trade positions. 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 the euro’s sharp depreciation might follow the outbreak, despite the currency’s outperformance of late.