Investors are betting the Fed will announce interest rate cuts at March meeting or even earlier
The U.S. dollar fell to a six-week low against a basket of currencies on Monday, and investors bet the Federal Reserve (FED) will loosen its policy in response to the negative impact of the new Coronavirus epidemic.
The US dollar index, which measures the greenback against a basket of six other major currencies, was down 0.53% at 97.448. The intraday low was 97.176, the lowest since January 16.
Global risk assets, including stocks, were hit hard last week as investors worry about the impact of the epidemic’s global spread on the economy.
The global market panic prompted Fed Chairman Powell to issue a statement on Friday saying that in the face of the risks of the epidemic, the Fed will “take appropriate action” to support the economy.
Investors believe that his speech implies that the Fed will cut interest rates at March meeting, and believe that it will encourage the other major global central banks to follow. Federal interest rate futures market trends suggest that the Fed will cut interest rates by 50 basis points at its March meeting. The market expects that the Fed has more room for easing and it may cause substantial damage to the attractiveness of the dollar.