FOREX-Dollar strengthens, boosted by worries over coronavirus impact

* Dollar Index on pace for third straight day of gains
* Dollar funding shortages support greenback

(New throughout, updates prices, market activity and comments
to U.S. market open, new byline, changes dateline, previous
LONDON)
By Saqib Iqbal Ahmed
NEW YORK, March 19 (Reuters) - The U.S. dollar rose against
a basket of currencies for a third day 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
about 1.0% to 101.76, its highest since January 2017. The index
is up about 3% for the week.
"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," Chandler said.
The dollar's rally has crushed several currencies to
multi-year lows. The euro EUR= was 1.31% lower at $1.077, its
weakest since April 2017, as traders rushed to dump euro
positions despite a fresh round of stimulus from the European
Central Bank.
Though the European Central Bank announced a 750 billion
euro ($817 billion) asset-purchase programme in response to the
coronavirus outbreak, currency traders were not impressed.
"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, head of FX and commodity
research.
"The swap facilities should normally give access to euro
funding. 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 9 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. The British pound rallied 1.11% after the Bank of England
cut interest rates to 0.1% and ramped up its bond-buying
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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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