Dollar hits two-year lows as Fed affirms dovish stance

NEW YORK: The US dollar fell to a two-year low on Wednesday after the Federal Reserve repeated a pledge to use its "full range of tools" to support the US economy and keep interest rates near zero for as long as it takes to recover from the fallout from the coronavirus outbreak.

The US central bank cited concerns about economic activity and employment remaining "well below their levels at the beginning of the year."

"It is definitely a bit more cautious and dovish, and basically tells the market they're not going to raise interest rates any time soon," said Kathy Lien, managing director at BK Asset Management in New York. "In an environment where the market is dumping dollars, it's another excuse to drive it lower."

The dollar index against a basket of currencies fell 0.44% to 93.42 after getting as low as 93.17, the weakest since June 2018.

The euro gained 0.56% to $1.1780, after earlier reaching $1.1805, the highest since September 2018.

The greenback has tumbled on expectations that the Fed will continue its ultra loose monetary policy for years to come and on speculation that it will allow inflation to run higher than it has previously indicated before raising interest rates.

This comes as the United States faces a continuing rise in coronavirus cases even as other parts of the world, including Europe, appear to have contained outbreaks.

"The dollar's outlook remains weak thanks to the diverging trends in coronavirus cases between Europe and the US," said Ulrich Leuchtmann, head of foreign exchange and commodity research at Commerzbank.

US deaths from the novel coronavirus surpassed 150,000 on Wednesday, a number higher than in any other country and nearly a quarter of the world's total, according to a Reuters tally.

Weakness in the US currency was broad spread with the Japanese yen and Sterling setting four-month highs while the Australian dollar set a more than one-year peak.

The dollar was last down 0.10% at 104.97 yen. Sterling gained 0.45% to $1.2988 and the Aussie gained 0.36% to $0.7183.

Elsewhere, Turkey's lira skidded to record lows against the euro and other currencies on Wednesday, as concerns over depleted reserves and local demand for dollars brought a third day of selling despite costly state efforts to stabilize trading.