The US dollar entered the week seeing a fall from grace. With the currency being the choice of many investors during the coronavirus outbreak, USD enjoyed a surge of support as a safe haven currency. This trend still continued but USD took a hit as the odds of a Fed reserve interest rate cut mounted. The USD declined through the week as the fears of the COVID-19 disease increased. The US economy was consumed by the virus fears, leaving it trading on a downturn.
The emergency rate cut from the Fed shocked the market on Tuesday as the official policy decision wasn’t to be held until two weeks’ time. The decision was made on Tuesday to cut the interest rate by 50 basis points to 1.25% from 1.75%. The cut wasn’t a total shock to the market, but more the timing as currency analysts had priced in a 50bps cut, but had the timing set for the Fed’s policy meeting later this month.
The US dollar struggled to make headway on Thursday, as very low U.S. yields and the prospect of even more monetary easing held back the currency’s advancement, while coronavirus fears supported the safe-haven yen. Strong data showing U.S. services activity at a one-year high and hiring growth had pushed the US dollar 0.3% higher on the euro overnight Wednesday. However, with benchmark U.S. 10-year yields a little over 1% and futures markets pricing another 50 basis points of Federal Reserve cuts by July, USD failed to strive ahead in Asia, this left the euro steady at $1.1136.
Meanwhile, in politics, the strong performance of former Vice President Joe Biden in the Democratic nomination campaign allowed the dollar to rise on Thursday, with an increase in risk appetite drawing investors away from the safety of the Japanese yen. Biden is considered less likely to raise taxes and impose new regulations on business than rival Bernie Sanders.
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