Dollar Hits 2-Week Lows as Pandemic Fears Intensify
The dollar extended losses on Thursday, falling to two-week lows against a currency basket as the first confirmed coronavirus case of unknown origin in the U.S. heightened fears of a pandemic.
The dollar fell 0.4% to 109.94 yen , extending a pullback from a 10-month high of 112.23 yen reached on Feb. 20.
The dollar was down 0.5% to 0.9716 Swiss franc, a currency that is traditionally sought as a safe haven.
The dollar fell from a three-month high versus the pound and declined versus the euro as 10-year U.S. Treasury yields hit record lows amid worries over whether the world’s largest economy was prepared for the epidemic.
Money markets are now pricing a roughly even chance of a Federal Reserve interest rate cut next month and have almost fully priced a cut by April. However, many economists question whether interest rate cuts are the most appropriate way to sustain demand in the face of the current demand shock.
The Bank of Korea, at its policy meeting earlier Thursday, left its key rate unchanged, despite South Korea being the country worst affected by the virus outside China.
New infections of the virus are now growing at a faster rate outside of China, where it originated, stoking fears that the economic impact of travel curbs, supply chain disruptions, and falling demand might be far greater than previously anticipated.
“The dollar doesn’t look so safe if we are dealing with the spread of the virus in the United States,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.
The Centers for Disease Control and Prevention warned on Wednesday of the possibility of community spread after confirming a coronavirus infection in someone who had not travelled abroad or been exposed to a known carrier of the virus, a first for the country.
That brought the total number of cases in the U.S. to 15, according to the CDC, which is still a tiny fraction of the cases in China.