Dollar in nosedive as Fed announces new approach

Chris Lee

The US dollar continued its trajectory of fluctuation on Tuesday after it was revealed that the country’s central bank would start backstopping a variety of loan types.

The Federal Reserve announced the move on Monday and said that it would now lend against other forms of debt including credit card loans.

It said that it would also offer loans backed by student loan debt – and that it would purchase a range of bonds of big employers too.

As a result, the US dollar’s value in the currency markets appeared to dip.

It went back down by half a percentage point in a major indicator of its performance relative to its rivals.

It pushed currencies such as the Australian dollar, which is broadly related to commodity prices and which has taken a battering in recent weeks, up.

That particular currency was up by over an entire percentage point in this pair.

It rose by this much from $0.58305.

The single European currency also saw a boost in its performance.

It was up by 0.7% in its pair against the greenback, reaching $1.07825 at one stage.

The volatility experienced by the US currency has been severe.

The markets are now operating in the context of one of the most severe periods of economic and social disruption for decades thanks to the coronavirus pandemic.

On Monday, the UK became the latest country to announce that its country was going into lockdown – with a whole new range of limits placed on freedom of movement.

Despite the fact that coronavirus looks set to continue to dominate the economic news for a long time to come, the economic calendar continued to hold scheduled events which were not directly related to the virus.

Tuesday afternoon, for example, will see a preliminary release from Markit covering services PMI in the US over the course of March.

This is expected to be released at 1:45pm GMT and show a dip from 49.4 to 42.

New home sales data for February will be released in the US shortly afterwards at 2pm GMT, covering the month of February.

This is due to show a change from 764,000 to 750,000 on a month on month basis.

Later in the day, there will be some information on New Zealand’s trade balance for February.

This is due at 9:45pm GMT.

Looking ahead to Wednesday, the UK’s consumer price index for February will be released at 7am GMT.

This is due to show a change from 1.8% to 1.6% on a year on year basis.

In Germany, a current assessment of business conditions and expectations for March will be out at 9am GMT.

This is expected to show a change from 93.8 to 93.7 and will come from the CESifo group.

At lunchtime in the GMT time zone, information on non-defence capital goods orders – excluding aircraft – will be released for February in the US.

This is expected to show a change from 1.1% to -0.5%.

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