* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, March 23 (Reuters) - The U.S. dollar fell back
towards the day's lows against its rivals on Monday after the
Federal Reserve said it would begin backstopping a wider range
of credit, a move that fuelled a rally in risky currencies
including the Australian dollar.
After already aggressively easing monetary policy this
month, including sending interest rates to near zero, the U.S.
central bank said it would now lend against student loans and
credit card loans as well as buy bonds of larger employers.
The move yanked commodity-focused currencies such as the
Australian dollar AUD=D3 from the day's lows into positive
territory and pushed the U.S. dollar back down 0.5% against its
rivals in volatile trading =USD .
"Risk rallied and took the major currencies with it
following the Fed announcement of their support package,
although it did not take long for fresh selling to cap the
equity rally," said John Marley, a senior FX consultant at FX
risk management specialist SmartCurrencyBusiness.
The euro EUR=EBS extended its gains and was up 0.7% at
$1.07825 while the Australian dollar rebounded more than 1% from
the day's lows to $0.58305, up 0.4% on the day.
"There's no doubting that the Fed is doing everything within
its power to see the economy through this period of unbelievable
turmoil," said Craig Erlam, a senior market analyst at Oanda
Europe.
The whipsaw moves in currency markets in afternoon London
trading saw expected price swings in the currency markets hit
new highs with implied volatility on one-month euro/dollar
options rising to a 2011 high EUR1MO= .
Earlier, a 9% rally by the dollar over the past two weeks
looked set to continue on Monday as a collapse in stock markets
raised concerns that central bank actions were not enough.
The U.S. currency's earlier rise was also fuelled by a
turnaround in dollar positions among hedge funds to a net short
from an overall long bet, according to latest positioning data.
That raised speculation that the dollar's rally could be partly
explained by short-covering by traders.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
USdpositions https://reut.rs/3doNKUA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>