NEW YORK (Reuters) – The U.S. dollar dropped on Wednesday against the Japanese yen and Swiss franc, in line with the stock market’s plunge, as fears over the spreading coronavirus pushed investors into safe havens, even as sterling fluctuated between gains and losses after the Bank of England unexpectedly cut interest rates.

Central banks and governments around the world are scrambling to limit the economic damage of the coronavirus outbreak, which has sent stock markets into a tailspin as investors head for the safety of government bonds.

Investors were also disappointed as President Donald Trump made no major announcements on stimulus measures. Expectations that Trump will unveil a significant stimulus plan had bolstered risk appetite on Tuesday and prompted investors to temporarily move away from safer assets.

Trump did say on Tuesday he would ask Congress for a payroll tax cut and other “very major” stimulus moves, but the details remained unclear.

“The lack of U.S. leadership, both domestically and internationally, is not boosting investor confidence,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

Trump on Wednesday again sought to calm fears about the fast-spreading coronavirus and said on Twitter he would use all government resources necessary to combat it. He gave no further details.

Sterling earlier rebounded on the BoE’s 50 basis-point rate cut, as the move including actions to support bank borrowings, reassured investors.

But the pound eventually fell, tracking the drop in stocks and risk appetite overall, sliding 0.6% to $1.2835 GBP=D3.

Against the euro, the pound eased 0.6% 87.87 pence per euro EURGBP=D3.

The dollar was down sharply against the safe-haven yen and Swiss franc. It lost 0.9% to 104.72 yen JPY=, falling more than a full yen from Tuesday’s high of 105.915.

The dollar also fell 0.2% against the Swiss franc to 0.9378 franc CHF=, while the euro was little changed against the dollar at $1.1274 EUR=.

Against a basket of currencies, the dollar was up 0.2% at 96.517 =USD.

Money markets are fully pricing in a further 10 basis-point cut by the European Central Bank when it meets on Thursday. =ECBWATCH

The BoE rate cut follows similar moves by U.S. and Canadian central banks and puts more pressure on the ECB to act, although it has limited room with rates already negative.

“We are preparing for the ECB tomorrow, which could do something,” said Bannockburn’s Chandler. “The BoE gave us a taste of what could happen. We’re expecting something major from the ECB.”

Source: Read Full Article