Dollar rises following Federal Reserve emergency rate cut

David Hobart

The US dollar began to rise again on Wednesday after it suffered at the hands of a Federal Reserve rate cut earlier in the week.

The dollar index, an artificial tracking tool used to monitor how the currency is performing compared to many others from around the world, was up again – which was welcome news for dollar traders who were hurt by the currency’s decline.

The index was up by 0.24% overall and reached 97.365 at one stage.

This was a far cry from its previous position of 96.926 which it registered at one stage on Tuesday.

This represented its worst position since early in January.

The context of the changes in the dollar’s value is that the US Federal Reserve, which is the country’s central bank, made the decision on Tuesday to cut interest rates.

This happened during an emergency meeting. It saw a downward move of 50 basis points, which reflects a drop of 0.5% overall.

It was as a result of the ongoing coronavirus, which is currently causing significant worry for financial markets across the world, that the emergency meeting was held.

The reason for the dollar’s rebounding, however, was that there were several positive economic data releases from the US over the course of Wednesday.

One such release covered private payrolls and showed that these went up in February by a higher amount than had previously been predicted.

Over in the services sector, the data in February was the best in a whole year – which suggests that the US economy is, despite fears over the virus, still very strong.

Elsewhere around the world, the Canadian dollar also dipped over the course of the day.

The Bank of Canada mimicked its partner over the border by reducing rates by 0.5%.

It went from 1.75% to 1.25% – and it even went so far as to say that it would cut rates again if it had to in the face of the coronavirus.

The single European currency dipped again after the dollar surged back into action.

It was down by 0.31% in this pair and reached $1.1136 at one stage.

According to analysts, there is a major threat on the horizon – and that is the expected interest rate cut from the European Central Bank, which is broadly expected to occur when the Bank meets next week.

Markets are predicting that there is a 90% chance of the Bank reducing its deposit rate by 10 basis points.

This would be a very significant cut, especially given that the rate currently sits in negative figures at -0.5%.

The British pound managed to secure its best day in its pair against the single European currency for around a fortnight.

According to the Bank of England’s new governor, Andrew Bailey, a rate cut in Britain might be required to combat the coronavirus.

There was some tiny movement in the pound’s pair against the dollar, and it was seen at $1.2817 at one point.

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David Hobart
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