FOREX-Dollar dips but set for best week since 2008 crisis

* Dollar rally loses steam, but weekly gain huge
* Aussie, pound lift from milestone lows
* Signs of dollar shortage remain
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, March 20 (Reuters) - The dollar was headed for
its biggest weekly gain since the 2008 global financial crisis
on Friday, even as its rally lost some steam, with the
coronavirus pandemic driving a dash for cash that is straining
the world's financial plumbing.
The dollar is up 3.7% on a basket of currencies =USD
through a week when investors have liquidated everything from
stocks to bonds, gold and commodities for the safety of cash.
The Australian dollar AUD=D3 led Friday's partial recovery
among beaten-down majors with a 1.7% gain to $0.5839. Sterling
GBP=D3 rose 1.3% from a 35-year low to $1.1636.
The yen JPY= rose 0.6% to 110.05 per dollar.
But with signs of stress in the financial system still
elevated - even as central banks across the globe pump cheap
dollars to banks - few expect a reversal of the dollar's rise.
"People are selling everything and the common thread is they
just want cash," said Stuart Oakley a Singapore-based executive
with Nomura, who runs the bank's trading with its clients.
"People just want cash because at the end of the day, people
don't know where their next revenue is coming from and they've
got payments to meet. I don't think that's going to change."
Virus news has also been grim. An official in Tehran tweeted
that the coronavirus was killing one person every 10 minutes.
In Italy, soldiers were called in to shift the dead from a
cemetery overwhelmed by the numbers. California on Thursday issued a stay-at-home order for its
40 million residents, as cases in the United States surge past
13,000.
"We anticipate that the USD can retain its new-found poise
for several more months," said NAB head of FX strategy Ray
Attrill in a note.
"The deeper the global downturn the lower the nadir in the
AUD and NZD," he said, with worst-case forecasts pointing to a
low of $0.53 for the Aussie and $0.45 for the kiwi.
Already the dollar's gains over the past few weeks and
months have been staggering. The Australian dollar is down
almost 30% on the greenback since the start of this year and has
not had a two-week drop so deep since 2008.
Norway's central bank is considering FX intervention after a
20% fall in the krona NOK= in a fortnight.
The desperation for dollars has also been evident in the
bond market, where liquidity has been poor and an inverse
relationship with stocks has broken down.
To try and alleviate the strain, the U.S. Federal Reserve
overnight extended a discount dollar funding facility to nine
more central banks, so that dollars can wash across the globe.

But stress, reflected in cross-currency basis swaps which
show the cost of borrowing dollars abroad, has barely abated.
The premium over interbank rates that investors were paying
to swap yen for one-year dollar funding JPYCBS1Y= was around
68 basis points, still close to the 2016 highs hit last week.
Euro cross-currency basis swap spreads also remain wide
EURCBS3M=ICAP and so is the FRA-OIS spread USDF-O0X1=R , a
barometer of risk in the interbank market.
"World markets are still very, very nervous," said Westpac
FX analyst Imre Speizer. "People are scrambling for (cash) any
way they can."