The dollar recouped some losses on Wednesday after weakening across the board in the previous session when the Federal Reserve’s emergency 50 basis point rate cut failed to ease fears over the global economic fallout from the spread of the coronavirus.
The Fed’s decision to cut rates came two weeks ahead of a regularly scheduled policy meeting. The last time the Fed made a rate cut between scheduled meetings was in October 2008 at the height of the global financial crisis.
But investors remained fearful that the rate cut would not be sufficient to support markets after the Fed acknowledged scale of the challenge and the limits of monetary policy to deal with a public health crisis.
“We do recognize that a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain; we get that,” Fed Chairman Jerome Powell told reporters at a press conference.
More than 3,000 people have been killed by the coronavirus, about 3.4% of those infected and it continues to spread quickly beyond the epicentre in China.
“The question here is whether a conventional interest rate response is sufficient,” said Sameer Goel, chief strategist, Asia macro, at Deutsche Bank in Singapore.
“It’s still not clear how big the problem ultimately is, or could be, and until you know that, it’s hard to know how much medicine to apply to it.”
The dollar fell to 106.85 yen overnight, its lowest in almost five months before pulling back to 107.41 yen by 03:55 AM ET.
The greenback bought 0.9550 Swiss franc, close to its weakest level in almost two years.
The euro last traded at 1.1178, close to a two-month high reached on Tuesday.
Against the British pound, the euro traded at 0.8740, near the highest in more than four months.
Against the dollar, sterling slid to 1.2792, giving back modest gains from the previous session.