* Investors bet on Fed rate cut at March 17-18 meeting or earlier
* U.S. manufacturing activity weakest since August -Markit
* Sterling under pressure as Brexit talks begin (New throughout, updates prices, market activity and comments; new byline, changes dateline, previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, March 2 (Reuters) - The U.S. dollar slipped to a fresh one-month low against a basket of currencies on Monday, as investors bet on the U.S. Federal Reserve easing policy in a bid to counter the negative impact from the spread of the new coronavirus.
The dollar index, which measures the greenback’s strength against a basket of six other major currencies, was 0.44% lower at 97.543; after slipping to a 1-month low of 97.296.
Global risk assets, including equities, were hammered hard last week as investors worried about the economic impact of the global spread of the virus.
The panic in global markets prompted U.S. Federal Reserve Chairman Jerome Powell to issue a statement late on Friday saying the Fed would “act as appropriate” to support the economy.
Investors took his comments as a hint that the Fed will deliver a cut when it meets March 17-18, and as an encouragement to central banks around the world to follow suit. Futures now imply a 50 basis point cut at the meeting.
“The U.S. dollar continued to bleed strength as the spreading coronavirus heightened expectations for shock and awe caliber interest rate cuts by America’s central bank,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
U.S. manufacturing activity grew at the most tepid pace in six months in February as the supply chain disruptions arising from the coronavirus outbreak dragged on output and new orders, a survey of purchasing managers showed on Monday.
The damage to global markets due to the spread of the coronavirus has raised hopes of a coordinated policy action from global monetary authorities.
But policymakers at the European Central Bank, including its president, Christine Lagarde, have shown reluctance to cut rates from the current minus 0.5%.
“I would be cautious in thinking the ECB does anything other than liquidity provision,” said Colin Harte, head of multi-asset at BNP Paribas Asset Management.
Markets now see a 50-50 chance of some kind of ECB easing next week and a rate cut of 10 basis points in April.
On Monday, the euro was up 0.9% against the dollar.
The yen, which tends to draw investors during times of geopolitical or financial stress as Japan is the worlds biggest creditor nation, was up 0.5% against the dollar despite Bank of Japan Governor Haruhiko Kuroda saying the BOJ would take necessary steps to stabilize financial markets.
Sterling came under renewed pressure on Monday, dropping to a 4-1/2 month low against the euro, as traders took a cautious view at the start of talks between Britain and the European Union on their future relationship after Brexit.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Sujata Rao in London; Editing by Steve Orlofsky