FOREX-Dollar soars, boosted by worries over coronavirus impact

* Dollar index logs third straight day of gains
* Dollar funding shortages support greenback

(Updates to U.S. afternoon)
By Saqib Iqbal Ahmed
NEW YORK, March 19 (Reuters) - The U.S. dollar rallied
across the board on Thursday, as worries about the economic
fallout from the coronavirus boosted dollar demand despite
recent steps by world central banks aimed at alleviating market
stress.
The dollar index =USD , which measures the greenback's
strength against a basket of six other major currencies, rose
2.0% to 102.73, its highest level since January 2017. The index
is up about 4% for the week.
"The dollar's rampage continues into another session today
in FX markets, focusing on the G10 currencies that previously
performed well amidst the market turmoil," said Simon Harvey, a
London-based market analyst at Monex Europe.
The euro was 2.15% lower against the dollar. Against the
Swiss franc CHF= , the greenback was up 1.9%, while it gained
2.63% against the yen.
"The dollar's strength is, in effect, a powerful
short-covering rally," said Marc Chandler, chief market
strategist at Bannockburn Global Forex. "It was used to fund a
great part of the global circuit of capital. The circuit of
capital is in reverse now, and the funding currency is being
bought back."
The dollar's rally has crushed several currencies to
multi-year lows. The euro was at its weakest since April 2017,
as traders rushed to dump euro positions despite a fresh round
of stimulus from the European Central Bank.
The European Central Bank announced a 750 billion euro ($817
billion) asset-purchase programme in response to the coronavirus
outbreak.
"While the ECB's announcement has helped the bond market, it
has done little for the euro," said Chandler.
The ECB's purchase scheme, announced after an emergency
meeting late on Wednesday, came less than a week after
policymakers launched fresh stimulus measures. The fall in the euro mirrored a sudden widening in FX
implied borrowing costs for the U.S. dollar, indicating that
investors were rushing to secure their short-dated funding.
"There are still fears about refinancing of European debt in
U.S. dollars," said Ulrich Leuchtmann, Ulrich Leuchtman, head of
FX strategy at Commerzbank in Frankfurt.
"The swap facilities should normally give access to euro
funding," he said. "But I think this is not calming down the
market. There's a general assumption that there are a lot of
U.S. funding needs, not just in Europe but also around the world
as a whole."
Though global central banks have pumped in billions of
dollars in emergency liquidity injections in recent days and
strengthened swap lines with some global central banks, dollar
funding pressures remained exacerbated across the board.
Investors are selling what they can to keep their money in
dollars due to the unprecedented amount of uncertainty caused by
the coronavirus pandemic, which threatens to paralyse the global
economy.
The U.S. Federal Reserve opened the taps for central banks
in nine new countries to access dollars in hopes of preventing
the coronavirus outbreak from causing a global economic rout.
The dollar pared gains just before the Fed
announcement. "Having this FX swap line is going to be pretty important
down the line. But from a confidence point of view, when that
has been impacted it's really hard to have normalized reaction
functions," said Mazen Issa, senior currency strategist at TD
Securities in New York.
The British pound fell 0.72% even as the Bank of England cut
interest rates to 0.1% and ramped up its bond-buying program.
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USDindex https://tmsnrt.rs/3b4TFfu
Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
Global currencies vs. dollar IMG https://tmsnrt.rs/2PmYOcE
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