Investing.com – The U.S. dollar gave up early-day gains on Monday, pressured by growing investor expectations the Fed could deliver a rate cut sooner rather than later to cushion the impact from the coronavirus outbreak.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.06% to 99.13.
A rapid rise in the number of Covid-19 cases in Iran, Italy, and South Korea over the weekend has increased bets on a near-term Fed rate cut, putting the greenback on the back foot.
Italy reported more than 220 cases of the virus, with five deaths as of Monday morning. South Korea confirmed 231 cases, taking the total in the country to more than 830. Iran, meanwhile, confirmed 61 total cases, with 12 deaths nationwide.
In the event the spread of the coronavirus continues, the Fed may cut rates as soon as March and “it is likely not just cutting 25 basis points,” Evercore ISI said in a note to clients.
Still, the current odds of Fed rate cut by March stand at just 23%, according to the Investing.com Fed Rate Monitor Tool.
Against rising investor concerns about a coronavirus pandemic, the yen appears to have regained its safe-heaven status following a rout last week against the greenback on fears about a significant virus-led hit to Japan’s economy given the country’s close proximity to China.
USD/JPY fell 0.88% to Y110.59.
EUR/USD rose 0.16% to $1.0860, but some have downplayed the prospect of a prolonged run higher for the single currency amid signs of a rise on bearish bets on concerns about growth in the eurozone.
Net short positions in the euro rose in the week to Feb. 18, according to U.S. Commodity Futures Trading Commission data, and the “extended downtrend in the spot market suggests more downside for the positioning gauge,” ING FX strategist Francesco Pesole said.