Early trade in New York: Dollar falls broadly

The dollar fell broadly on Tuesday after the US Federal Reserve on Monday committed to buy an unlimited amount of bonds and as investors were optimistic the American government would pass a stimulus package to offset the economic impact of the coronavirus pandemic. Against a basket of its rivals, the dollar fell 0.42% to 101.71. It is down from a more than three-year high of 102.99 on Friday.
"The Fed's measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis," said Vasileios Gkionakis, head of FX strategy at Lombard Odier.
The Fed on Monday announced various programs, including purchases of corporate bonds, guarantees for direct loans to companies and a plan to get credit to small and medium-sized business.
While the Fed's latest measures were seen to have effectively broken the spreading freeze in the dollar funding markets in the short term, the shock to the real economy is expected to last for a far longer period.
The US Senate could pass a $2 trillion coronavirus economic stimulus package as soon as Tuesday, negotiators said, which analysts say is needed to blunt the economic harm from business shutdowns.
Ulrich Leuchtmann, head of foreign exchange and commodity research at Commerzbank, said in a note that, as more economies enact draconian measures to lock down their economies, the global economy would be massively constrained in the near future and markets could quickly turn back into risk-off mode. Against the dollar, the euro jumped 0.82% to $1.0809. The British pound also rose 1.72% to $1.1747, up from a 35-year low of $1.1413 set last week. The Australian dollar gained 1.53% to $0.5916, extending its recovery from a 17-year low of $0.5510 last week.