* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Yoruk Bahceli and Marc Jones
LONDON, March 4 (Reuters) - The dollar recouped some losses
on Wednesday as traders looked to see which other major central
banks might follow the U.S. Federal Reserve and make emergency
cuts to their interest rates.
The Fed surprised investors by slashing rates by 50 basis
points to a target range of 1.00% to 1.25% on Tuesday, two weeks
before a regularly scheduled policy meeting, in an effort to
combat the effects of the coronavirus. The euro has been one of the currencies to climb on the
broad-based dollar weakness of recent weeks and it had slipped
back to $1.1145 EUR=EBS ahead of U.S. trading from Tuesday's
two-month high at $1.12135.
"We are looking at how the central bank community is going
to react now," said TD Securities' European Head of Currency
strategy, Ned Rumpeltin.
Could more central banks make emergency cuts? "We are
expecting the unexpected. We are not taking anything for granted
here," he added.
Money markets in the euro zone are pricing a 90% chance that
the ECB will cut its deposit rate, now minus 0.50%, by 10 bps
next week ECBWATCH .
They are also pricing a 50% chance of a second, 25 bps cut
in April by the Fed though some analysts are already talking
about U.S. central bank hitting zero percent before the end of
the year. FEDWATCH
"The dollar's weakness is reflected in the euro, because the
Fed will likely ease more than the ECB," said Masafumi Yamamoto,
chief currency strategist at Mizuho Securities in Tokyo.
The dollar, which also fell to a five-month low of 106.85
yen JPY=EBS in Asia on Wednesday, was last up 0.35% at 107.51
yen. It was also up 0.2% against a basket of currencies. .DXY
The chance of a swift cut from the Bank of England GBP=D3
brought sterling down to $1.2792, 0.2% on the day. Uncertainty
about trade talks between Britain and the European Union is
weighing on sterling too.
There were also other factors to digest for the dollar.
Joe Biden made a surprisingly strong showing on Tuesday
across the South, Midwest and New England in the contest to
select a Democratic challenger to U.S. President Donald Trump in
the Nov. 3 election.
"The resurgence of Joe Biden will help to dampen some of the
downside risks for the U.S. dollar given fears over a sharper
shift to the left under Bernie Sanders have eased," wrote MUFG
currency analyst Lee Hardman.
In the Chinese onshore market, the yuan CNY=CFXS touched a
six-week high of 6.9288 per dollar, another sign of the dollar's
weak bias. It shrugged off a survey showing China's services had
their worst month on record in February.
Coronavirus hits financial markets https://tmsnrt.rs/2TI8YnE
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