Dollar records biggest weekly drop since 1985

Subject: Dollar records biggest weekly drop since 1985 Sun Mar 29, 2020 7:47 pm

NEW YORK: Two weeks after investors dumped everything they could to hoard US dollars, some are now starting to sell.
Intercontinental Exchange Inc’s US Dollar Index sank 4.4% this week, the biggest weekly drop since 1985.
Traders point to a confluence of reasons, ranging from less stress in funding markets, the repatriation of funds as the quarter ends and the worsening coronavirus outbreak in the US.

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“The sell-off in the US dollar is a reaction to the liquidity measures announced by the Federal Reserve and other central banks,” said Jane Foley, a currency strategist at Rabobank. “Fear may have subsided for now.”
A separate gauge of the greenback, the Bloomberg Dollar Spot Index, fell 4.1% on the week, the largest weekly loss since its inception in 2005. It had surged 8.3% over the previous two weeks.
The greenback slumped against most of 16 major peers this week, weakening more than 7% against the Norwegian krone and the British pound.
The decline comes after the Federal Reserve expanded currency swap lines with central banks, ramped up cash offered to the repurchase-agreement markets and introduced a series of tools to unfreeze credit markets.
Stress in cross-currency basis markets, a key funding channel, has eased.

The three-month dollar-yen basis is now back to levels seen in early March, while the euro equivalent has swung into positive territory. In foreign-exchange swap markets, the costs to borrow dollars is back to about 1.86% after it printed at more than 2.5% last week.

“It’s 100% a dollar-funding story – the mean reversion of the dollar liquidity crunch is prompting all other FX to rally against the dollar,” said Margaret Yang, a strategist at CMC Markets Singapore Pte.

More: https://www.freemalaysiatoday.com/category/business/2020/03/28/dollar-records-biggest-weekly-drop-since-1985/

Dollar records biggest weekly drop since 1985

Dollar records biggest weekly drop since 1985

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