FOREX-Swingeing Fed rate cut bets send dollar reeling to 1-mth low

* Euro firm as euro/dollar carry trade pared back
* Investors bet on Fed rate cut at March 17-18 or even
earlier
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates throughout changes byline, dateline)
By Sujata Rao
LONDON, March 2 (Reuters) - The dollar retreated on Monday
to one-month lows against a basket of currencies, weighed down
by the prospect of a full-blown rate-cutting cycle to counter
the economic damage inflicted by the coronavirus.
Panic in global markets that saw world shares shed almost
$6 trillion last week prompted U.S. Federal Reserve Chairman
Jerome Powell to issue a statement late on Friday saying the
central bank will "act as appropriate" to support the economy.
Investors took his comments as a hint the Fed will deliver a
cut when it meets from March 17-18, and as an encouragement to
central banks around the world to follow suit. Futures now imply
a 50 basis point cut 0#FF: at the March 18 meeting.
"The Fed is among the G10 central banks with the highest
interest rates so it has more room to cut rates, and that's
making the dollar weaker. What's priced for the ECB is roughly
15 basis points by the end of 2020 while for the Fed it's 100
bps," said Ulrich Leuchtman, head of FX strategy at Commerzbank
in Frankfurt.
The dollar index slipped 0.2% =USD while against the euro
the greenback was down half a percent to touch a one-month low
EUR=EBS of $1.109.
Markets are now expecting Australia to cut rates on Tuesday,
and possibly Canada later in the week, while seeing a 50-50
chance of a European Central Bank move next week.
Despite money market pricing, ECB policymakers remain
reluctant to ease policy further from the current rate of minus
0.5% and the euro is benefiting from that as well as the lack of
room for monetary stimulus.
Bank of Japan Governor Haruhiko Kuroda also issued a
statement to say it would take necessary steps to stabilise
financial markets. The yen JPY= rose nonetheless and was up
0.3% to 107.82 per dollar.
The Australian dollar rose 0.4% to $0.6531 AUD=D3 and the
pound GBP= also rose 0.4% to $1.2850. The offshore-traded
Chinese yuan rose 0.2%, having earlier touched a one-month high
at 6.95 CNH=D3 .
Analysts said that the scale of the virus' spread meant
markets would stay on edge, however, keeping a lid on moves.
Officials in Washington state confirmed the second U.S. death
from the virus, while New York has confirmed its first positive
case. Chinese PMI surveys underscored the risk to world growth,
showing factories were dealt a devastating blow in February as
the outbreak triggered the sharpest contraction in activity on
record.
While German PMIs appeared to show the downturn was easing,
IHS Markit, the compiler of the data, said it could be a "false
dawn" which didn't fully incorporate the effects of the virus.
"It's a bit of a dilemma today between celebrating Fed cut
prematurely and really selling off risk," said Vishnu Varathan,
head of economics at Mizuho Bank in Singapore.
"What's most important, to quote (movie) Jerry Maguire, is
'show me the money'. It's not so much about the interest rate -
a 25 basis point interest rate cut is not going to make a
business that cannot find cashflow feel better," he said.
Speculation has also risen of a coordinated move by global
central banks but there was no official comment on this.