REFILE-FOREX-Dollar falls broadly as Fed stimulus calms panicky markets

(Refiling to fix spelling of FX strategy chief's first name in
3rd paragraph to "Vaselios" instead of "Vaselious" in)
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, March 24 (Reuters) - The dollar fell broadly on
Tuesday, sliding for a second consecutive day after the U.S.
Federal Reserve stepped up measures to shield an economy reeling
from emergency restrictions on commerce to fight the
coronavirus.
Against a basket of its rivals =USD , the dollar fell 1% to
101.04, down more than 1.5% from Monday's highs and having hit a
more than three-year high of 102.99 on Friday. It was on track
for its biggest single-day drop in three weeks.
"The Fed's measures are unprecedented and they have been
extremely proactive in preventing this external shock from
morphing into a wider funding crisis," said Vasileios Gkionakis,
head of FX strategy at Lombard Odier.
The Fed announced various programmes including purchases of
corporate bonds, guarantees for direct loans to companies and a
plan to get credit to small and medium-sized
business. While the Fed's latest measures were seen to have
effectively broken the spreading freeze in the dollar funding
markets in the short-term, the shock to the real economy is
expected to last for a far longer period with latest PMI data
offering a glimpse of the pain. Ulrich Leuchtmann, head of FX and commodity research at
Commerzbank said in a note that as more economies enact
draconian measures to lock down their economies, the global
economy would be massively constrained in the near future and
markets could quickly turn back into risk-off mode.
Business activity collapsed from Australia and Japan to
Western Europe at a record pace in March as nations locked down
to curb the spread of the disease, shuttering shops, restaurants
and offices.
IHS Markit's flash composite Purchasing Managers' Index
(PMI) for the euro zone, seen as a gauge of economic health,
plummeted to a record low of 31.4 in March, its biggest
one-month fall since the survey began in mid-1998.
Notwithstanding the collapse in the real economy, the euro
surged on Tuesday with traders reporting demand from insurance
firms and asset managers on expectations the latest round of
stimulus would calm panicky markets.
Against the dollar, the single currency EUR=EBS jumped
1.5% to $1.0880, a three-day high.
JP Morgan strategists said in a daily note the repeated
rounds of stimulus from global policymakers indicate that signs
of infection or death rates peaking in the most troubled areas
could fuel some demand for risky assets.
Some more relief was also evident in dollar funding markets
with measures of short-term funding indicators such as
euro-dollar FX swaps for three-month maturities EURCBS3M=ICAP
stabilising around 11 bps after blowing out to more than 100 bps
last week.
The British pound also rose 1.6% to $1.1742 GBP=D3 , up
more than two cents from its 35-year low of $1.1413 set last
week.
Trading remained volatile, with the Australian dollar rising
2.0% to $0.5952 AUD=D3 , extending its recovery from a 17-year
low of $0.5510 touched last week.

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