The U.S. dollar fell sharply in late trading on Monday as the expectation of the Federal Reserve's cut of the benchmark interest rate rose.

The dollar's losses on Monday come amidst growing speculation that the Fed will find the scope to cut interest rates by 50 basis points (bp) later this month in response to the growing coronavirus worries, said a note by forex trading platform Tempus.

The dollar index, which measures the greenback against six major peers, fell 0.79 percent at 97.3549 in late trading.

"The Fed narrative has quickly shifted to the possibility of preemptive easing. Our economists now forecast a 50-bp cut at the March meeting, while an inter-meeting cut would depend upon the level of market stress in the interim," said Adarsh Sinha, forex strategist with Bank of America Global Research on Monday.

The Federal Reserve is closely monitoring developments and their implications for the economic outlook and will use tools and act as appropriate to support the economy, said Federal Reserve Chairman Jerome Powell in an unscheduled statement on Feb. 28. Powell noted that the coronavirus poses evolving risks to economic activity.

The return of risk appetite in the broad financial markets also lent strength to currencies like Australian dollar and Canadian dollar.

Still, British pound softened substantially against the U.S. dollar as traders became cautious at talks between Britain and the European Union on post-Brexit ties.

In late New York trading, the euro was up to 1.1161 dollars from 1.1027 dollars in the previous session, and the British pound was down to 1.2776 dollars from 1.2792 U.S. dollars in the previous session. The Australian dollar was up to 0.6531 dollar from 0.6522 dollar.

The U.S. dollar bought 107.84 Japanese yen, lower than 107.85 Japanese yen of the previous session. The U.S. dollar fell to 0.9572 Swiss franc from 0.9656 Swiss franc, and it was down to 1.3353 Canadian dollars from 1.3402 Canadian dollars. 

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