FOREX-Dollar rebounds after Fed rate cut blow

* Mild weather bolsters U.S. private payrolls in February
* CAD falls as BoC matches U.S. rate cut on coronavirus
threat

(New throughout, updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, March 4 (Reuters) - The dollar climbed against a
basket of currencies on Wednesday after an emergency interest
rate cut in the previous session by the U.S. Federal Reserve
shoved the U.S. currency down to an eight-week low.
Investors were likely waiting to see which other major
central banks might follow the Fed and make emergency cuts to
their interest rates, as they try to fend off the economic
damage from the spreading coronavirus, analysts said.
The U.S. central bank surprised investors by slashing rates
by 50 basis points to a target range of 1.00% to 1.25% on
Tuesday, two weeks before a regularly scheduled policy meeting,
in an effort to combat the effects of the coronavirus.
The dollar index =USD , which measures the greenback's
strength against a basket of six other major currencies, was
0.24% higher at 97.365. The index slipped as low as 96.926 on
Tuesday, its weakest since Jan. 8.
"The dollar has found its feet after a phase of
underperformance against the euro and some other major
currencies," Jonathan Coughtrey, managing director at Action
Economics, said in a note.
Upbeat data also supported the greenback.
U.S. private payrolls increased more than expected in
February, pointing to labor market strength before a recent
escalation of recession fears ignited by the coronavirus
epidemic. U.S. services sector activity accelerated to a one-year high
in February, suggesting underlying strength in the economy
despite the coronavirus outbreak. On Wednesday, the euro EUR= , which has been one of the
currencies to climb on the broad-based dollar weakness of recent
weeks, was 0.31% lower at $1.1136.
"With the ECB about to cut imminently, it has deflated the
euro balloon a bit," Stephen Innes, chief market strategist at
Australian FX services provider AxiCorp, said, referring to the
European Central Bank.
Money markets in the euro zone are pricing a 90% chance that
the ECB will cut its deposit rate, now minus 0.50%, by 10 basis
points next week ECBWATCH .
The Canadian dollar CAD=D4 weakened against the greenback
on Wednesday after the Bank of Canada slashed its benchmark
interest rate to 1.25% from 1.75% due to the coronavirus
outbreak and said it was prepared to cut again if needed to
support economic growth. Sterling GBP= headed for its best day against the euro in
two weeks and inched up from 4-1/2-month lows against the dollar
on Wednesday, as incoming Bank of England Governor Andrew Bailey
said action could be needed to offset the effects of the virus.
Bailey said any BoE measures would be best done in tandem
with Britain's government, curbing expectations the bank might
follow Tuesday's emergency rate cut by the Fed.
The pound was about flat against the greenback at $1.2817.

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