Dollar, China, Asian Currencies, COVID-19, Federal Reserve

As easing expectations stall dollar, Asian currencies arrest slide. The virus spreads beyond China. It drives Fed rate repricing. Not a hike, Cut now expected in 2020. Against Asian currencies, Dollar pauses gains.

Investors sharply raised bets that the growing fallout of the outbreak of coronavirus will prompt United States interest rate cuts. Thus, on Tuesday, the dollar checked its march higher.

In Asian currencies, that helped to stay a steep slide. The virus’s recent rapid spread beyond China allowed the euro and pound to drift slightly higher.

Moh Siong Sim is a Bank of Singapore analyst. He said that overnight was a bit of panic over the risk of the virus going global. He thinks that they are back to assess how that situation is going to pan out from there. They have to take it as it comes.

Countries from all over the world step up efforts to prevent a pandemic. Infections tick past 80,000 People. Comparing to SARS, now we have ten times more cases.

Dollar Situation

China has almost all infections. Nevertheless, there are sharp rises in Italy, Iran, and South Korea. On Monday, it sent markets into a tailspin.

Expectations of rate hikes in the United States have vanished, and the United States bond yields plunged amid the turmoil.

Federal Reserve Funds rate for the futures have surged to instead price in a rate cut by June. Thus, more than 50 basis points of reductions by ear end or paused for though in the recent rush to buy dollars.

Rodrigo Catril is a senior Forex strategist at the National Australia Bank of Sydney. He says that the situation is theatrical.

Catril adds that they have seen not only the Fed expectations reprising, but also bigger repricing because the Fed is the one that might do something in terms of moving the rate of the cash.

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