“Commercial paper is a key source of shortterm funding for a wide range of businesses and credit markets have been under strain in recent days,” said CBA currency strategist Kim Mundy. “The FOMC is acting to limit any market dysfunction that can then raise interest rates for the broader economy.”
Both moves strengthened the DXY US dollar index to its highest point since February, with the stimulus plan boosting confidence in the US economy, which also faces recession.
The Australian dollar has been weakening against the greenback in the last few days, with foreign exchange investors favouring the greenback against the Swiss franc and Japanese yen.
A fall in commodity prices and broad risk-averse trading has only weighed on the Australian dollar.
“In the context of the highly elevated levels of risk aversion and depths to which commodity prices have fallen so far oil in particular in the case of the Aussie given the negative terms of trade shock this represents we said last week that both antipodean currencies were on borrowed time above US60¢,” said NAB head of FX strategy, Ray Attrill.
The Australian dollar is unlikely to find a firm footing any time soon, with the Reserve Bank of Australia preparing to take the cash rate to its effective lower bound and begin quantitative easing as soon as this week, according to market economists.
They are expecting the Reserve Bank will cut rates to a new historic low of 0.25 per cent on Thursday afternoon, as part of its policy measures to support the Australian economy.
Westpac chief economist Bill Evans said on Monday he expected the Reserve Bank would cut the cash rate by one quarter of a percentage point and announce quantitative easing.
Commonwealth Bank is forecasting the Australian dollar will fall to US57¢ in the second quarter of the year, with a fall to US55¢ or lower possible.