FOREX-Euro falls after ECB holds fire, dollar jumps as spreads widen

by ace
FOREX-Euro falls after ECB holds fire, dollar jumps as spreads widen

Today´s Deals

* Euro falls after ECB decides not to cut rates

* Dollar jumps, analysts cite increased swap spread

* Safe havens like the yen and the franc remain in demand

* Graph: World exchange rates in 2019 (Updates after ECB announcement, price updates)

By Saikat Chatterjee

LONDON (Reuters) – The euro weakened on Thursday after the European Central Bank announced more stimulus to combat the impact of the coronavirus, but did not cut interest rates, with the single currency falling to the day's low as it that investors ran for dollars.

The ECB approved new stimulus measures on Thursday to help the eurozone economy cope with the rising cost of the coronavirus epidemic, but has kept interest rates unchanged in a move that may disappoint financial markets.

The euro, before the announcement, jumped briefly to $ 1.13, but then fell to $ 1.111198, down 0.5% on the day.

Market watchers had expected an ECB cut in the main deposit rate of 10 bps.

A press conference is scheduled for 13:30 GMT in Frankfurt.

The dollar rebounded sharply after the ECB's announcement and rose 0.4% against a basket of currencies in 96.613.

Analysts said the dollar rose when swap spreads in major currencies exploded and investors fought for the US currency.

"It is a matter of liquidity in dollars, the swap based on cross currencies has exploded. I suppose banks / companies are moved. We are moving on to the next phase of liquidation," said Kenneth Broux, strategist at Societe Generale.

Safe haven currencies remained in demand on Thursday, with the Japanese yen and the Swiss franc leading the gains. The dollar had fought before U.S. President Donald Trump banned travel from Europe to contain the coronavirus.

With the latest ban that represents a new disruption to the global economy, traders were also disappointed by the lack of broad measures in Trump's plan to combat the pathogen, prompting traders to bet on a more aggressive easing of the Federal Reserve.

The story continues

Money markets now expect another 100 basis points of easing from the Fed next week, bringing benchmark policy interest rates to zero after a half-point cut last week.

"The market was looking for more," said Moh Siong Sim, currency strategist at the Bank of Singapore.

The Japanese currency rose 0.5% against the US dollar to 103.98 yen, down from the 101.28 four-year high reached on Monday. The Swiss franc rose, but then fell and fell 0.2% to $ 0.94.

Risk aversion was the dominant theme in foreign exchange markets on Thursday, as Asian and European stock markets were a sea of ​​red, forcing traders to flee from currencies strongly geared towards the global economy, such as the Norwegian krone and the Australian dollar.

Trump on Wednesday announced a ban on travelers from 26 European countries entering the United States for a month.

He released economic measures to fight the virus, but his address in the Oval Office was light on medical measures beyond guarantees that "the virus has no chance against us". (Reporting by Saikat Chatterjee) Additional reporting by Tommy Reggiori Wilkes Editing by Peter Graff

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