FOREX-Dollar dented as coronavirus damage spurs interest rate cut bets

* Investors bet on Fed rate cut at March 17-18 meeting or
earlier
* U.S. manufacturing activity weakest since August -Markit
* Sterling under pressure as Brexit talks begin

(New throughout, updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, March 2 (Reuters) - The U.S. dollar slipped to a
fresh one-month low against a basket of currencies on Monday, as
investors bet on the U.S. Federal Reserve easing policy in a bid
to counter the negative impact from the spread of the new
coronavirus.
The dollar index, which measures the greenback's strength
against a basket of six other major currencies, was 0.44% lower
at 97.543; after slipping to a 1-month low of 97.296.
Global risk assets, including equities, were hammered hard
last week as investors worried about the economic impact of the
global spread of the virus.
The panic in global markets prompted U.S. Federal Reserve
Chairman Jerome Powell to issue a statement late on Friday
saying the Fed would "act as appropriate" to support the
economy. Investors took his comments as a hint that the Fed will
deliver a cut when it meets March 17-18, and as an encouragement
to central banks around the world to follow suit. Futures
0#FF: now imply a 50 basis point cut at the meeting.
"The U.S. dollar continued to bleed strength as the
spreading coronavirus heightened expectations for shock and awe
caliber interest rate cuts by America's central bank," said Joe
Manimbo, senior market analyst at Western Union Business
Solutions.
U.S. manufacturing activity grew at the most tepid pace in
six months in February as the supply chain disruptions arising
from the coronavirus outbreak dragged on output and new orders,
a survey of purchasing managers showed on Monday. The damage to global markets due to the spread of the
coronavirus has raised hopes of a coordinated policy action from
global monetary authorities.
But policymakers at the European Central Bank, including its
president, Christine Lagarde, have shown reluctance to cut rates
from the current minus 0.5%.
"I would be cautious in thinking the ECB does anything other
than liquidity provision," said Colin Harte, head of multi-asset
at BNP Paribas Asset Management.
Markets now see a 50-50 chance of some kind of ECB easing
next week and a rate cut of 10 basis points in April.
On Monday, the euro was up 0.9% against the dollar.
The yen, which tends to draw investors during times of
geopolitical or financial stress as Japan is the worlds biggest
creditor nation, was up 0.5% against the dollar despite Bank of
Japan Governor Haruhiko Kuroda saying the BOJ would take
necessary steps to stabilize financial markets. Sterling came under renewed pressure on Monday, dropping to
a 4-1/2 month low against the euro, as traders took a cautious
view at the start of talks between Britain and the European
Union on their future relationship after Brexit.

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Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
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