By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The U.S. dollar slipped to a fresh eight-week low as U.S. benchmark 10-year Treasury yields fell to new troughs and traders bet the U.S. Federal Reserve will cut interest rates further, after slashing them by 50 basis points this week in an emergency move to shield the economy from the effects of the coronavirus.
Monetary policy easing in the United States, fueled by worries about the economic impact of the coronavirus, is endangering the dollar’s years-long rally and giving a boost to currencies around the world.
On Thursday, the dollar index <=USD>, which measures the greenback’s strength against a basket of six other major currencies, was about 0.8% lower at 96.639, after slipping as low as 96.608, its weakest since Jan. 6.
Money markets were pricing in another 25 basis-point-cut from the current 1% to 1.25% range at the next Fed meeting on March 18-19 and a 50-basis-point cut by April.
“The cuts were emergency, so it’s worth wondering, will the Fed strike again like this or will they telegraph another move? It seems like they’re willing to help at any point, thus the lack of faith in the buck is understandable,” said Juan Perez, senior foreign exchange trader and strategist at Tempus Inc in Washington.
The fast-spreading coronavirus, which emerged late last year in central China, is now in some 80 countries and has killed more than 3,000 worldwide.
Against the Japanese yen
“Wall Street was down nearly 3% at midsession, while Treasury yields headed to fresh all-time lows, both combining to weigh heavily on the pairing,” said Ronald Simpson, managing director of global currency analysis at Action Economics.
The dollar found little support from data that showed the number of Americans filing for unemployment benefits fell last week, suggesting the labor market was on solid footing despite the coronavirus outbreak.
The Canadian dollar weakened against its U.S. counterpart on Thursday, a day after the Bank of Canada delivered its biggest interest rate cut in more than 10 years and signaled it was ready to ease further because of the coronavirus outbreak.
Incoming BoE governor Andrew Bailey dampened expectations of an inter-meeting cut late on Wednesday, telling lawmakers the central bank should wait until it has more clarity about the economic hit from the outbreak.
(Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis)