Fed cut interest rate 50 basis points, investors still expect the uncertainty
The dollar fell across the board on Tuesday after the U.S. Federal Reserve (Fed) urgently cut interest rates to protect the world’s largest economy from the impact of the “new virus”.
Although Fed Chairman Powell reiterated his view that the US economy is still strong, he acknowledged that the spread of the virus has led to a substantial change in the Fed’s outlook on economic growth prospects.
“The epidemic and the measures being taken to control the epidemic will definitely affect economic activity for a period of time, no matter domestic or foreign,” Powell said at a press conference shortly after the Fed announced a rate cut of 50 basis points to the target range of 1.00% -1.25%.
The US dollar index, which measures the strength of the US dollar against a basket of six other major currencies, declined by 0.41% to 97.13. The US dollar index slipped to a near eight-week low of 96.926 after the announcement of the interest rate decision.
Although the United States still has room for rate cuts, other advanced economies have lowered interest rates to record lows and may be reluctant to cut rates further. It may put pressure on the dollar and push up other currencies. The Group of Seven (G7) finance ministers and central bank presidents said on Tuesday that, they will use all appropriate policy tools to achieve robust and sustainable growth and guard against the risk of a new coronavirus epidemic. Global risk assets, including stocks, were hit hard last week as investors feared the global spread of the virus could affect the economy.