The dollar plummeted against a basket of currencies Monday. Interest rate cuts usually weigh on a nations’ currency by making investments in that currency less attractive. However, the dollar’s drop was tempered somewhat as it’s seen as a safe bet in times of disaster as the world’s most liquid currency.
Sterling rebounded against the U.S. dollar; however, it hit a new six-month low against the euro Monday, as money markets digested an additional cut to U.S. interest rates to rock-bottom levels by the Fed in the face of the coronavirus pandemic.
The Fed cut interest rates to a target range of 0% to 0.25% Sunday, while five other central banks, along with the Bank of England (BoE), took steps to relieve a shortage of dollars and provide liquidity as a part of a globally coordinated action.
The pound was last up 0.6% in opposition to the U.S. greenback at $1.2355. It was briefly in the negative region earlier in the day as coronavirus fears continue to weigh, with sterling meeting Friday’s five-month low of $1.2250.
The pound performed less favorably against the dollar than other currencies seen as safer havens such as the Japanese yen and Swiss franc.
As a result, sterling plummeted to a new six-month low against the single currency, last down at 90.95 pence per euro.
FX strategist at Societe Generale, Kenneth Broux said the BoE might have to introduce more stimulus moves after its next meeting on March 26, along with potentially paring rates further or restarting quantitative easing asset purchases.