US dollar posts biggest weekly fall since 2009

NEW YORK (REUTERS) – The US dollar posted its biggest weekly decline in more than a decade on Friday (March 27), as trillions of dollars worth of stimulus efforts by governments and central banks helped temper a rout in global markets driven by the coronavirus pandemic.

The dollar surged in March as tumbling stock and debt markets caused a scramble for the world’s most liquid currency.

But big government spending pledges and coordinated efforts by central banks around the world to increase the supply of dollars have supported a rally in other major currencies.

The United States House of Representatives on Friday approved a US$2.2 trillion (S$3.1 trillion) aid package – the largest in American history – to help people and businesses cope with the economic downturn inflicted by the coronavirus outbreak.

The dollar dipped 0.87 per cent against a basket of currencies Friday to 98.41. It fell 3.90 per cent last week – its biggest weekly decline since March 2009.

The dollar index in the previous week had racked up its biggest weekly gain since the financial crisis.

“What we are seeing is abating stress in the money markets. Action by central banks has been successful so far and a shortage of dollars has been taken off the table,” said Commerzbank head of FX and commodity research Ulrich Leuchtmann.

After this month’s large price swings, investors were likely to be especially active rebalancing their books for month- and quarter-end.

The Global Foreign Exchange Committee on Thursday warned the coming few sessions could be volatile as market participants execute larger than normal trades as part of this process.

Against the yen, the dollar fell 1.56 per cent on Friday to 107.87 yen, as Japanese investors and companies repatriated funds before their fiscal year ends next week.

The euro gained 0.83 per cent against the greenback to US$1.1119.

Sterling jumped 2.07 per cent to US$1.2454 and the Australian dollar rose 1.78 per cent to US$0.6171.

Speculators increased their net short dollar position in the latest week to US$8.88 billion, from US$8.27 billion the previous week, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday.

“Now that the surge in demand for dollars overseas has been met by the Fed’s new improved swap lines, economic and medical fundamentals are taking over,” BDSwiss Group head of investment research Marshall Gittler said in a note on Friday.

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