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Dollar fluctuates after Fed’s unscheduled rate cut

Dollar fluctuates after Fed’s unscheduled rate cut

The U.S. dollar continued to trade lower on Wednesday after the Federal Reserve announced a cut in interest rates in a surprise move to counter the negative impact of the Coronavirus on the U.S. economy.

As of 07:55 GMT, the U.S dollar index, which measures the performance of six major currencies against the greenback, traded at 97.08, resuming its fall for a fifth straight session, noting that it hit its lowest level since January 16 on Tuesday.

In a statement issued on Tuesday, the Fed decided to cut its benchmark interest rate by 50 basis points to 1.25 percent from 1.75 percent after a unanimous vote from members to mitigate the damages of the coronavirus spread.

"The fundamentals of the U.S. economy remain strong, however, the virus poses a growing risk to economic activity," the US Central Bank said in a statement on Tuesday. "In light of these risks and in support of maximizing employment and price stability targets, the Fed has decided to cut interest rates."

At a press conference following the decision, Fed Chair Jerome Powell said the Fed found a threat to the outlook for the economy and chose to take action.

“In response to this position, we have decided to facilitate the monetary policy stance to provide more support to the economy," he added. "For us, which really matters, of course, is not the epidemic but the risks to the economy, so we've seen a threat to the economy and we've chosen to act."

The yield on the 10-year U.S. Treasury bill fell 1 percent for the first time in its history in Tuesday's trading after the sudden interest rate cut.

Later in the day, eyes will focus on the U.S. ADP Nonfarm Employment Change, which is published two days ahead of the non-farm payrolls figures.

American employers probably created 175,000 jobs last month, while the jobless rate stabilized at 3.6 percent, according to median forecasts for the NFP due on Friday.

A lower than expected pace of job creation may trigger fears about the world’s biggest economy, which would raise expectations of further rate cut by the Fed. Meanwhile, markets are pricing another rate cut by the Fed in July.

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