The U.S. dollar turned weak against most of its peers on Tuesday after the U.S. Federal Reserve announced a 50-basis points cut in interest rates, nearly two weeks ahead of ahead of its scheduled monetary policy meeting.

The dollar index dropped to a low of 96.98 after the Fed announced its decision to cut interest rates, and despite rising to 97.30 around early afternoon, the index retreated to 97.14 later on, down by about 0.22% from previous close.

The Federal Reserve announced its decision to lower the target range for the federal funds rate by 50 basis points to 1 to 1.25%. The accompanying statement from the Fed say the fundamentals of the U.S. economy remain strong but added that the coronavirus poses evolving risks to economic activity.

The central bank added that it is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.

Against the Euro, the dollar weakened to $1.1179, losing about 0.4% from Monday’s close of $1.1134. Soon after the Fed cut rates, the dollar dropped to 1.1213, but later regained some ground.

The euro had declined against the dollar earlier in the day as odds of a European Central Bank rate cut grew after President Christine Lagarde said that the central bank is prepared to take measures to protect the economy from the coronavirus outbreak.

Lagarde’s statement came after central bank chiefs of the U.S. and Japan pledged to act to support their economies from the impact of coronavirus.

But the currency advanced against the dollar after the Fed cut rates. Data from Eurostat showed inflation in the currency bloc slowed to 1.2% in February from 1.4% in January. Headline inflation remained well below the European Central Bank’s target of “below, but close to 2%.

The Pound Sterling strengthened to $1.2844 a little past noon, but later gave up some gains. It was last seen at $1.2811, still holding strong with a gain of nearly 0.5%.

The Japanese Yen gained more than 1% against the dollar, advancing to 107.18.

The dollar strengthened to C$1.3375 against the loonie.

The Aussie strengthened to 0.6596 against the dollar, from a low of 0.6510 seen earlier in the day, after the Reserve Bank of Australia lowered its key interest rate to a fresh low to support the economy in response to the coronavirus outbreak.

The board of the Reserve Bank of Australia, governed by Philip Lowe, decided to cut the cash rate by a quarter-point to a record 0.50%.

Policymakers observed that the global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target.

Against Swiss franc, the dollar eased to 1.0465, giving up nearly 0.4%.

The material has been provided by InstaForex Company – www.instaforex.com