Dollar Loses Ground As Fed Slashes Interest Rates Again

The U.S. dollar drifted down sharply on Monday after the Federal Reserve slashed interest rates by 100 basis points on Sunday and announced a new quantitative program as well, aiming to fight the impact of the coronavirus outbreak.

The Fed's moves, coming ahead of the two-day monetary policy meeting set to begin on Tuesday, have raised concerns that the central banks around the world would run out of ammunition to deal with a deepening crisis.

The Fed lowered the target range for the federal funds rate to zero to 0.25% from 1 to 1.25%, noting the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the U.S.

The central bank said it expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

In addition to cutting rates, the Fed also announced a new quantitative easing program, revealing plans to increase its holdings of Treasury and mortgage-backed securities by at least $700 billion.

Earlier this month, the Fed had cut interest rate by 50 basis points.

The dollar index dropped to a low of 97.45 in the Asian session, and later recovered to 98.70 before retreating to around 98.0, netting a loss of about 0.74%.

Against the Euro, the dollar weakened to $1.1177, down 0.66% from Friday's close.

The Pound Sterling was stronger at $1.2249, recovering from $1.2284.

The Japanese Yen strengthened to 105.96 a dollar, up from 107.94 a dollar.

Against the Aussie, the dollar rose to 0.6097, gaining more than 1.7%. The dollar was up sharply against the loonie at 1.4012, while against Swiss franc, it dropped to 0.9461, giving up nearly 0.6%.

According to a report released by the Federal Reserve Bank of New York, New York manufacturing activity unexpectedly contracted in the month of March.

The report said the bank's general business conditions index plunged to a negative 21.5 in March from a positive 12.9 in February, with a negative reading indicating a contraction in regional manufacturing activity.

Economists had expected the general business conditions index to show a much more modest decrease and remain positive at 4.0.

The material has been provided by InstaForex Company - www.instaforex.com

source http://www.mt5.com/forex_news/quickview/2153607/