March 12, 2020 / 8:21 PM / 17 days ago

FOREX-Euro slides after ECB stimulus; dollar gains after NY Fed move

    * Euro falls after ECB decides not to cut rates
    * Dollar jumps, analysts cite swap spread rise
    * Safe havens like the yen and franc remain in demand
    * Graphic: World FX rates in 2019

 (Adds analyst comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 12 (Reuters) - The euro weakened on Thursday, as investors were unimpressed by the
European Central Bank's stimulus measures to fight the economic fallout from the coronavirus outbreak,
with investors flocking to the safe-haven dollar after the Federal Reserve said it will inject liquidity
into a banking system showing signs of stress.
    The ECB approved fresh stimulus measures on Thursday to help the euro zone economy cope with the
growing cost of the coronavirus epidemic, but kept interest rates unchanged.
    "They (ECB) very much felt the pressure to at least do something because every other central bank is
lowering interest rates or doing multi-policy fronts that will help banks and businesses," said Erik
Bregar, head of FX strategy at Exchange Bank of Canada in Toronto.
    A few hours later, the Federal Reserve Bank of New York said it will introduce $1.5 trillion in new
repo operations this week and start purchasing a range of maturities as part of its monthly Treasury
purchases in moves to stem panic caused by a market meltdown.
    It offered $500 billion in a three-month repo operation on Thursday and will offer an additional $500
billion in one-month repo and $500 billion in three-month repo loans on Friday.
    The move, though, hardly stabilized the currency and stock markets, as it further increased demand for
U.S. dollars.
    "We don't think this can turn around risk sentiment – it can't prevent the upcoming slowdown in
consumption and economic activity," said Elsa Lignos, global head of FX strategy, at RBC Capital Markets
in London. 
    "But it does mean that financial markets don't need to hoard liquidity in the way consumers have been
hoarding tissue paper and pasta," he added.
    In afternoon trading, the euro fell 0.8% against the dollar to $1.1176.
    The dollar rebounded sharply against a basket of currencies after the ECB announcement, and held gains
after the NY Fed announcement. The dollar index was last up 0.9% at 97.455. 
    Analysts said the dollar had rallied as swap spreads on major currencies blew out and investors
scrambled for the U.S. currency.
    The dollar had earlier struggled after U.S. President Donald Trump banned travel from Europe to stem
the coronavirus.
    With the latest ban posing a fresh disruption to the global economy, traders were also disappointed by
the lack of broad measures in Trump's plan to fight the pathogen, prompting traders to bet on further
aggressive easing by the Federal Reserve.
    Fed funds futures on Thursday implied traders saw a 100% likelihood that the central bank's benchmark
overnight lending rate will fall by at least another 75 basis points this month. 
    The dollar rose 0.9% against the Japanese currency to 105.49 yen, way above a four-year low
on Monday. It also rose 0.8% against the Swiss franc to 0.9455.
    Trump announced on Wednesday a 30-day ban on travellers entering the United States from 26 European
countries, effective from midnight on Friday. 
    Currency bid prices at 3:51 PM (1951 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1191        $1.1267     -0.67%         -0.17%      +1.1333     +1.1056
 Dollar/Yen       JPY=        105.4500       104.5300    +0.88%         -3.13%      +106.0800   +103.1100
 Euro/Yen         EURJPY=     118.02         117.73      +0.25%         -3.22%      +118.3200   +116.3200
 Dollar/Swiss     CHF=        0.9449         0.9387      +0.66%         -2.37%      +0.9552     +0.9323
 Sterling/Dollar  GBP=        1.2613         1.2820      -1.61%         -4.87%      +1.2849     +1.2492
 Dollar/Canadian  CAD=        1.3825         1.3776      +0.36%         +6.46%      +1.3896     +1.3706
 Australian/Doll  AUD=        0.6324         0.6484      -2.47%         -9.93%      +0.6492     +0.6267
 Euro/Swiss       EURCHF=     1.0576         1.0574      +0.02%         -2.54%      +1.0591     +1.0543
 Euro/Sterling    EURGBP=     0.8871         0.8790      +0.92%         +4.93%      +0.8913     +0.8776
 NZ               NZD=        0.6150         0.6267      -1.87%         -8.70%      +0.6277     +0.6093
 Dollar/Norway    NOK=        10.1008        9.6906      +4.23%         +15.06%     +10.2631    +9.6889
 Euro/Norway      EURNOK=     11.3080        10.9190     +3.56%         +14.94%     +11.4346    +10.9054
 Dollar/Sweden    SEK=        9.6686         9.5158      +0.83%         +3.44%      +9.8738     +9.5016
 Euro/Sweden      EURSEK=     10.8112        10.7227     +0.83%         +3.27%      +10.9476    +10.7284
 (Reporting by Gertrude Chavez-Dreyfuss in New York
Editing by Marguerita Choy and Matthew Lewis)
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