Dollar ends mixed as Fed introduces new measures

Market Review - 23/03/2020 23:42GMT  

The greenback pared its losses made in Asia and Europe and ended mixed on Monday amidst the U.S. Federal Reserve's announcement of new measures to offset recent economic impact caused by the worldwide spreading of coronavirus pandemic.  
  
Reuters reported the U.S. Federal Reserve on Monday rolled out an extraordinary array of programs to backstop an economy reeling from sweeping restrictions on commerce that scientists say are needed to slow the coronavirus pandemic and ultimately keep more people safe.  
  
For the first time, the Fed will back purchases of corporate bonds, backstop direct loans to companies and "soon" will roll out a program to get credit to small and medium-sized business. It also said it will expand its asset purchases by as much as needed to stabilize financial markets.  
  
The series of actions marks a massive intervention by the U.S. central bank beyond the financial markets, where it has so far concentrated its firepower, into the real U.S. economy.  
  
Under the new programs, the Fed will lend against student loans, credit card loans, and U.S. government backed-loans to small businesses, and back loans to larger employers in what amounts to four years of bridge financing.  
  
In a statement the Fed said the effort, approved unanimously by members of the Federal Open Market Committee, was taken because "it has become clear that our economy will face severe disruptions" as a result of the health crisis. "Our nation's first priority is to care for those afflicted and to limit the further spread of the virus."  
  
Versus the Japanese yen, dollar met renewed selling at 111.25 in New Zealand and fell to session lows at 109.67 at European open due to drop in U.S. Treasury yields and stock futures before staging a strong rebound to 110.88 on cross-selling in jpy. Despite a brief but sharp fall to 109.83 at New York open after U.S. lawmakers failed to reach an agreement on the new stimulus package, the pair then rallied to a near 1-month high at 111.59 on renewed usd's strength before easing.  
  
The single currency went through a hectic session. Although price briefly dropped to a fresh near 3-year bottom at 1.0637 in New Zealand, the pair erased its losses and rallied to 1.0768 at European open on cross-buying in euro before retreating to 1.0667 on profit-taking. Price then jumped to 1.0801 at New York open after Fed's announcement, and later ratcheted higher to an intra-day high of 1.0827 but only to weaken in tandem with sterling to 1.0721 near New York closing.  
  
Reuters reported euro zone consumer confidence fell by 5.0 points in March form the February number, figures released on Monday showed.  
  
The European Commission said a flash estimate showed euro zone consumer morale decreased to -11.6 this month from -6.6 in February.  
  
Economists polled by Reuters had expected a fall to -14.2.  
  
In the European Union as a whole, consumer sentiment fell by 4.5 points to -10.4.  
  
The European Commission said that due to the coronavirus (COVID-19) crisis, the data collection period had stopped earlier than usual in the large majority of countries. Only approximately 15% of consumers' responses were collected after strict confinement measures were taken in the individual countries.  
  
The British pound also went through another volatile session on continued fear over coronavirus pandemic. Cable met renewed selling at 1.1740 (Reuters) in New Zealand and dropped to 1.1533 before rebounding in tandem with euro to 1.1714 at European open on short-covering. The pair then dropped to 1.1507 and despite recovering to 1.1675 in New York open, price later tumbled to session lows of 1.1445 (Reuters) due to usd's strength and cross-selling in sterling and ended at 1.1545 near the close.  
  
In other news, Reuters then reported the measures adopted by the European Central Bank in response to the coronavirus emergency are sufficient and effective but the bank is ready to do more if necessary, a member of its Governing Council, Ignazio Visco, said on Monday.   
  
"The set of measures adopted has been effective in relieving tensions. We believe today that these are sufficient, but we are ready to do more if needed," Visco, who is also Governor of the Bank of Italy, told newspaper La Stampa in an interview.   
  
He added that the ECB was ready to increase the size of the emergency bond purchase program (PEPP) announced last week as well as changing its composition and length in time.   
  

Data to be released on Tuesday:  

Australia manufacturing PMI, services PMI, Japan Jibun bank manufacturing PMI, leading indicator, France Markit manufacturing PMI, Markit services PMI, Germany Markit manufacturing PMI, Markit services PMI, EU Markit manufacturing PMI, Markit services PMI, UK Markit manufacturing PMI, Markit services PMI, CBI trends orders, U.S. building permits, redbook, Markit manufacturing PMI, Markit services PMI, new home sales, Richmond Fed manufacturing index.