FOREX-Dollar on track for biggest weekly fall in a decade

* Dollar index on track for biggest weekly fall in decade
* Market could see more volatility toward month-end
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Iain Withers
LONDON, March 27 (Reuters) - The dollar was on track for its
biggest weekly decline in more than a decade on Friday, as
trillions of dollars worth of stimulus efforts by governments
and central banks helped temper a rout in global markets
triggered by the coronavirus pandemic.
The dollar had been riding high in March amid a drive for
dollars by investors trying to get their hands on the world's
most liquid currency, and one considered a safe haven.
But big government spending pledges, including a $2.2
trillion U.S. package, and co-ordinated efforts by central banks
around the world to increase the supply of dollars have
supported a rally in other major currencies.
An unprecedented jump in U.S. jobless claims on Thursday
underscored the coronavirus's impact on the country's economy,
further weakening the dollar. The dollar consolidated losses on Friday, edging up 0.2% on
the day against major currencies, but was still on course for a
near 3% fall for the week - its biggest decline since May 2009.
=USD
The swing underscores the currency market's volatility after
the dollar index last week racked up its biggest weekly gain
since the financial crisis.
"The sharp reversal of the US dollar yesterday was clear
evidence that the deluge of measures from the Federal Reserve to
address dollar liquidity problems were finally becoming more
successful," said analysts at MUFG in a note.
"While we believe the ultimate direction of the dollar
following this crisis will be down, we can't be complacent in
assuming this is now under way. That would be premature ... We
need to wait and see before a trend of USD weakness becomes
established."
Against the yen, the dollar fell 0.7% on Friday to 108.855
yen JPY=EBS , as Japanese investors and companies repatriated
funds before their fiscal year ends next week.
The euro ticked down 0.2% to $1.10080 but was still on track
for an almost 3% gain over the dollar this week. EUR=EBS
The dollar barely moved versus sterling and the Australian
dollar as they consolidated the week's gains. GBP=D3 AUD=D3
But the dollar was up more than 1% against the
export-exposed Norwegian crown and South African rand. NOK=
ZAR=
The dollar funding squeeze in the interbank market has
abated considerably this week. Currency basis swap spreads, the
premium investors need to pay over interbank rates to fund
dollars through foreign currency swaps, fell considerably.
"Now that the surge in demand for dollars overseas has been
met by the Fed's new improved swap lines, economic and medical
fundamentals are taking over," said analysts at BDSwiss in a
note.