WASHINGTON (dpa-AFX) - The U.S. Dollar was weak against most major currencies on Monday amid rising prospects for an interest rate cut by the Federal Reserve this month.
Expectations of a rate cut intensified following Fed Chairman Jerome Powell's statement that the central bank would 'act as appropriate' to support the economy.
'The coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy,' Powell said on Friday.
The Federal Reserve is scheduled to meet on March 18 - 19.
A few other global central banks, including the Bank of Japan and the Bank of England, too have indicated that they would ease monetary policies to ensure stability in the financian markets roiled by the coronavirus outbreak.
The dollar index, which settled at 98.13 on Friday, declined to a low of 97.18 a litte past noon, but recovered to 97.58 later.
A report released by the Institute for Supply Management on Monday showed U.S. manufacturing activity saw a slight expansion in the month of February.
The ISM said its purchasing managers index edged down to 50.1 in February from 50.9 in January, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to dip to 50.5.
Construction spending in the U.S. jumped by 1.8% to an annual rate of $1.369 trillion in January after inching up by 0.2% to a revised rate of $1.346 trillion in December. Economists had expected construction spending to climb by 0.7% compared to the 0.2% dip originally reported for the previous month.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) downgraded its global growth outlook on Monday, saying the impact of the Covid-19 outbreak on economic prospects is set to be severe.
The Paris-based think tank lowered the global growth projection for this year by 0.5%, while prospects for China was revised down markedly, with growth seen slipping below 5% this year.
In the Interim Economic Assessment, the OECD said global GDP growth is projected to drop to 2.4% in 2020 from an already weak 2.9% in 2019. The forecast for 2021 was trimmed to 3.3% from 3.6%.
The Euro strengthened to $1.1134, from Friday's close of $1.1026. Eurozone manufacturing activity contracted only marginally and at the slowest pace for the past year in February, final survey data from IHS Markit showed.
The factory Purchasing Managers' Index rose to 49.2 in February from 47.9 in January. This was slightly above the flash score of 49.1.
Against Pound Sterling the dollar was stronger at 1.2748, gaining from $1.2823 Friday afternoon.
The UK manufacturing sector expanded at the fastest pace in ten months in February as domestic demand continued to recover on the back of reduced political uncertainty, survey data from IHS Markit showed.
Another report from the Bank of England showed that mortgage approvals for house purchase, which is an indicator for future lending, increased to the highest level in nearly four years in January.
The Japanese Yen dropped to 108.28 a dollar, from 107.89. after Bank of Japan Governor Haruhiko Kuroda said the central bank would take necessary steps to help protect markets the impact of the coronavirus.
'The Bank of Japan will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases,' Kuroda said in a statement.
The dollar weakened to 0.6534 against the Aussie, sliding from $0.6515. The Reserve Bank of Australia, which holds its second meeting of the year on Tuesday is widely expected to cut interest rates.
The dollar was weak against the Loonie with the latter advancing to 1.3327 from Friday's 1.3407.
The Swiss franc strengthened to 0.9587 a dollar, from 0.9649.
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