The dollar sank on Thursday and is on track for its biggest two-day drop this year after the U.S. Federal Reserve signalled it was ready to cut interest rates as early as next month.

The Fed joined its global peers such as the European Central Bank and the Australian central bank this week in signaling that more policy stimulus is needed to boost growth, sending relatively higher yielding currencies such as the Australian dollar to the Korean won rallying.

“With global central banks engaged in a battle to weaken their currencies, there is a rush to high quality currencies with higher interest rates,” said Neil Mellor, a senior currency strategist at BNY Mellon in London.

The dollar fell 0.3% against a basket of its rivals to 96.755. It fell 0.5% to a six-month low against the Japanese yen at 107.47.

The greenback came under additional pressure after benchmark 10-year Treasury yields fell to the lowest in more than two years.

“Even though the market had anticipated much of what the Fed said, the dollar’s fall was still a relatively large one,” said Daisuke Karakama, chief market economist at Mizuho Bank.

“The main question is no longer if the Fed will cut rates in July, but whether the easing will be by 25 or 50 basis points.”

The overnight drop in global bond yields has boosted rate cut bets across global markets with money markets pricing in three rate cuts from the Fed before the end of the year and as many as five cuts until mid 2020.

Expectations of more rate cuts from the Fed boosted the Norwegian crown with the currency rallying 0.8% versus the dollar and nearly 0.5% against the euro with markets widely expecting the central bank to raise interest rates at a policy decision.

China’s yuan rallied to its strongest level in five weeks amid broad dollar weakness and signs that China and the United States are returning to the negotiating table in their trade dispute. – Reuters