* Fed cuts rates by a half percentage point
* Yen, Swiss franc gain as investors still see uncertainty
(Updates to U.S. afternoon)
By Saqib Iqbal Ahmed
NEW YORK, March 3 (Reuters) - The U.S. dollar fell across
the board on Tuesday after the U.S. Federal Reserve cut interest
rates in an emergency move designed to shield the world's
largest economy from the impact of the coronavirus.
Though Fed Chair Jerome Powell reiterated his view that the
U.S. economy remains strong, he acknowledged that the spread of
the virus had caused a material change in the U.S. central
bank's outlook for growth. "The virus and the measures that are being taken to contain
it will surely weigh on economic activity, both here and abroad,
for some time," Powell said in a news conference shortly after
the central bank said it was cutting rates by a half percentage
point to a target range of 1.00% to 1.25%.
The dollar index =USD , which measures the greenback's
strength against a basket of six other major currencies, was
0.41% lower at 97.13. The index slipped to a near 8-week low of
96.926 after the interest rate decision before paring losses.
"This is definitely not good for the dollar," said Mark
McCormick, global head of FX strategy at TD Securities.
While the U.S. has room to cut interest rates, other
developed economies have already slashed rates to record lows
and may be hesitant to reduce them further. That is likely to
weigh on the U.S. currency and boost the currencies of other
countries, he said.
Tuesday's rate cut boosted the 3-month euro-dollar cross
currency basis swap to a 12-year high of 0.80 basis points, up
from 0.29 basis on Monday. The move pointed to a sharp reduction
in dollar shortage.
The Fed's move comes shortly after Group of Seven finance
officials said on Tuesday they would use all appropriate policy
tools to achieve strong, sustainable global growth and safeguard
against downside risks posed by the fast-spreading
coronavirus.
Global risk assets, including equities, were hammered last
week as investors worried about the economic impact of the
global spread of the virus.
The safe-haven Japanese yen and Swiss franc gained on the
dollar on Tuesday, as investors remained nervous about the
economic fallout of the coronavirus outbreak.
The yen, which tends to attract investors during times of
geopolitical or financial stress as Japan is the world's biggest
creditor nation, was up about 1% against the dollar, while the
Swiss franc, another safe haven, rose 0.3%.
The euro, lifted in recent sessions by hopes that the U.S.
would be able to do more on rate cuts than the Europe, was up
0.42% against the dollar.
On Tuesday, the Australian dollar AUD=D3 was 0.84% higher
after the Reserve Bank of Australia (RBA) cut interest rates by
25 basis points, as anticipated. Markets had priced the
possibility of a larger cut. Sterling rose 0.42% against the dollar on Tuesday, even as
Britain's fractious trade talks with the EU and expectations of
rate cuts to counter coronavirus damage kept the currency near
recent 4-1/2-month lows.
Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
Euro dollar exchange rate https://tmsnrt.rs/38lAfRM
Major central bank policy rates https://tmsnrt.rs/2uU412C
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