March 13, 2020 / 7:13 PM / 3 months ago

FOREX-Dollar surges vs yen as stock markets rally

    * Dollar surges, adds more than 2% vs yen
    * ECB did not follow Fed, BoE in cutting rates
    * European markets rebound after Thursday's meltdown
    * Policymakers struggle with coronavirus response
    * Graphic: World FX rates in 2020

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 13 (Reuters) - The dollar surged on Friday, posting sharp gains against the safe-haven
Japanese yen as stock markets recovered globally and investors cheered efforts by governments and
policymakers to address the economic fallout from the coronavirus outbreak.
    The greenback extended gains against several currencies after a blowout in swap spreads on Thursday
signaled that investors want dollars. While those spreads came in on Friday, the dollar held strong.
    The dollar also benefited from a news report that U.S. President Donald Trump will declare a national
emergency over the fast-spreading coronavirus on Friday, opening the door to more federal aid to combat
the disease.
    But market participants said signs of dollar funding stress persist and policymakers probably need to
do more.
    "Underlying concerns regarding the economic fallout from the coronavirus on credit markets broadly
remain," said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto. 
    "It may be tempting to look for signs of a low in global stocks but with the underlying issue - the
coronavirus - still unchecked, we think that is premature at this point," he added.
    He noted that the cost of raising U.S. dollar funds in the cross-currency euro swap market has widened
again on Friday after narrowing the day before on the Federal Reserve's announcement to inject more
liquidity into the banking system. 
    Wider spreads in the cross currency basis swap market suggested increased signs of U.S. dollar
shortage for corporates seeking funding.
    In afternoon trading, the dollar gained 2.9% against the yen to 107.66.
    Wells Fargo said it had further upgraded its forecast for the yen against the dollar as the risk of
financial turmoil remains, saying that the greenback will fall below 100 yen.
    "The rate cuts and other policy actions from global central banks have done little to quell market
panic. That may be due to the fact that fiscal policymakers have generally been slow to act," said Wells
Fargo in a research note.
    The dollar also rallied versus another safe haven, the Swiss franc, rising 1.1% to 0.9543 franc
    Against a basket of currencies, the dollar rose 1.2% to 98.362.
    The euro nursed losses despite European Central Bank policymakers' efforts to reassure markets.
European assets sold off on Thursday after investors were underwhelmed by the bank's stimulus measures.
The euro was last down 0.9% at $1.1091.
    The ECB on Thursday announced a stimulus package that provides loans to banks with rates as low as
-0.75% and increases bond purchases, but it did not join its counterparts in the United States and Britain
by cutting rates.
    The pound also plunged 2% against the dollar to $1.2302.
    The greenback's rebound this week reflects its role as the world's most liquid currency, which
investors seek in times of stress.
    The Fed meets next week and many analysts now expect the central bank to chop its own target policy
rate, quite possibly to zero, and give markets new guidance about how it plans to combat the economic
fallout from the coronavirus.
    Currency bid prices at 2:53PM (1853 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1071        $1.1183     -1.00%         -1.24%      +1.1221     +1.1055
 Dollar/Yen       JPY=        108.0600       104.6300    +3.28%         -0.73%      +108.1400   +104.5100
 Euro/Yen         EURJPY=     119.64         117.01      +2.25%         -1.89%      +119.8400   +116.9000
 Dollar/Swiss     CHF=        0.9546         0.9437      +1.16%         -1.36%      +0.9560     +0.9423
 Sterling/Dollar  GBP=        1.2306         1.2571      -2.11%         -7.19%      +1.2624     +1.2278
 Dollar/Canadian  CAD=        1.3922         1.3926      -0.03%         +7.20%      +1.3994     +1.3782
 Australian/Doll  AUD=        0.6147         0.6234      -1.40%         -12.45%     +0.6326     +0.6123
 Euro/Swiss       EURCHF=     1.0568         1.0555      +0.12%         -2.62%      +1.0618     +1.0551
 Euro/Sterling    EURGBP=     0.8995         0.8894      +1.14%         +6.41%      +0.9019     +0.8845
 NZ               NZD=        0.6040         0.6086      -0.76%         -10.33%     +0.6160     +0.6018
 Dollar/Norway    NOK=        10.1174        10.1613     -0.43%         +15.33%     +10.2363    +9.8832
 Euro/Norway      EURNOK=     11.2110        11.3478     -1.21%         +13.97%     +11.4520    +11.0055
 Dollar/Sweden    SEK=        9.7323         9.7346      -0.63%         +4.11%      +9.8247     +9.6258
 Euro/Sweden      EURSEK=     10.7732        10.8414     -0.63%         +2.90%      +10.9411    +10.7710
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard Chang)
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