Federal Reserve Slashes Interest Rates
The forex market was energetic after the US Federal Reserve decided to cut interest rates by half a percentage point.
Markets had expected the move as the Fed intended to support the economy amid the looming coronavirus threat.
The US dollar index, which pits the buck against other majors, lost 0.15% to 97.21, with session lows of 96.98.
Against the Chinese yuan, the greenback gained 0.3% at 6.9350. The People’s Bank of China (PBOC) held its short-term borrowing cost the same, despite the Fed’s emergency cut.
Against the Japanese yen, the dollar gained 0.2% at 107.37.
The Reserve Bank of Australia also recently cut interest rates, putting the price at a record low of 0.5%. It sought to contain the economic fallout from the worsening coronavirus crisis.
The Australian dollar gained 0.2% against the dollar.
BoC and RBNZ to Follow the Federal Reserve’s Footsteps
Markets are now expecting the Bank of Canada and Reserve Bank of New Zealand also to cut critical rates.
Investors are expecting the BoC to cut benchmark rates by 25 points when it announces its decision later in the day.
However, because the Fed did 50-basis-point cut, money markets quickly priced in a 50-point move too for the BoC.
Meanwhile, the Reserve Bank of New Zealand is also increasingly likely to cut its official cash rate after the RBA did it first.
RBNZ Governor Adrian Orr will deliver the next review of the OCR on March 25.
Experts had initially priced in a 25-basis-point cut for the meeting. However, because of new developments, a 50-point cut isn’t out of the question.
The RBNZ said it would release its “high-level principles” about the assessment and use of unconventional policy tools.
It said Orr’s speech would not discuss current economic conditions of the bank’s outlook for OCR.
The World Health Organization warned about the continual spread of coronavirus cases in the West and Italy. It said the world was in “uncharted territory.”
There are now more than 92,000 virus cases worldwide, while the death toll has reached 3,110 globally.
Yesterday, the death toll in Washington state rose to 9, while total cases rose to 27. Before that, there were only 18 cases and six deaths, according to the state’s health department.
Meanwhile, virus cases were slowing down in China. Thousands have recovered there, and the number of new infections dropped to the lowest levels in several weeks.
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