FOREX-Dollar slips as Fed's money bazooka loosens tight cash supply

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, March 24 (Reuters) - The dollar slipped on Tuesday on
signs tight funding conditions are easing slightly after the
U.S. Federal Reserve pulled out all stops to supply much needed
greenback liquidity.
The Fed announced unlimited quantitative easing and
programmes to support credit markets on Monday in a drastic bid
to backstop an economy reeling from emergency restrictions on
commerce to fight the coronavirus.
"We seem to have got out of a phase where everything from
stocks to safe assets such as bonds and gold were sold," said
Koichi Kobayashi, chief manager of forex at Mitsubishi Trust
Bank.
"The dollar funding conditions are easing slightly, compared
with a week ago, though I wouldn't say things are normal. While
the Fed is pumping dollars, we still need to wait and see if
those money will flows to every corner of the economy."
The dollar index =USD lost about 0.5% to 101.64, slipping
further from Friday's peak of 102.99, its highest level since
January 2017.
Against the yen, the dollar shed 1% to 110.19 yen JPY= ,
having hit a one-month high of 111.59 in the previous session.
The euro gained 0.8% to $1.0810 EUR= , bouncing back from a
near three-year low of $1.0636 in the previous session.
The British pound also rose 0.8% to $1.1650 GBP=D4 , up
more than two cents from its 35-year low of $1.1413 set last
week.
The Fed, which has already expanded its balance sheet to a
record level, undertook unprecedented measures to extend its
"lender of last resort" power beyond Wall Street to Main Street
and City Hall. It announced various programmes including purchases of
corporate bonds, guarantees for direct loans to companies and a
plan to get credit to small and medium-sized business.
The radical steps came after U.S. money markets seized up as
a broad set of market participants, from big multinational
carmakers to small shop owners, hoarded dollars fearing a slump
in cashflow during lockdowns in their countries.
While the Fed's move is likely to mitigate the blow for many
companies in the long-run, investors remained on edge amid
uncertainty about the extent of the pandemic.
Coronavirus cases continued to rise exponentially in many
countries, raising worries about the lack of hospital beds in
some areas. Wall Street's slide deepened on Monday as the rapidly
spreading coronavirus forced more U.S. states into lockdown
while Washington's fiscal stimulus package remained stalled in
the Senate. "The market is still nervous about possible moves to cash
everything, including unwinding of existing derivative
positions," said Kyosuke Suzuki, director of forex at Societe
Generale.
The three-month dollar/yen currency basis swap spread, seen
as the market premium demanded for swapping yen for dollar,
stood at 0.80% JPYCBS3M=TKFX , down from a peak of around 1.4%
last week but still far above normal levels around 0.2-0.4%.
Trading remained volatile, with the Australian dollar rising
1.8% to $0.5932 AUD=D4 , extending its recovery from a 17-year
low of $0.5510 touched last week.
The Mexican peso MXN=D4 and the South African rand
ZAR=D4 jumped more than 1% and many emerging market currencies
gained too.
Market players are looking to a raft of business sentiment
surveys in Europe due later in the day for a glimpse of how the
virus is affecting the real economy.