FOREX-Dollar holds gains as European markets rebound after crash

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* ECB did not follow Fed, BoE in cutting rates
* European markets rebound after Thursday's meltdown
* Policymakers struggle with coronavirus response

LONDON, March 13 (Reuters) - The dollar stood tall on Friday
as investors rushed to buy the currency amid deepening panic
over the coronavirus epidemic, while the euro nursed losses
after the European Central Bank underwhelmed investors by not
cutting rates.
The greenback held gains against most currencies after a
blowout in swap spreads on Thursday signalled that investors
want dollars.
Equity markets in Europe clawed back some ground in early
trading to steady nerves after plunging on Thursday.
Norway's central bank became the latest to cut rates on
Friday in an attempt to limit the economic damage, sending the
crown up about 1% against the U.S. dollar and the euro as
investors welcomed the move to support the oil-dependent economy
NOK=D3 EURNOK=D3 . The ECB on Thursday announced a stimulus package that
provides loans to banks with rates as low as -0.75% and
increases bond purchases, but it did not join its counterparts
in the United States and Britain by cutting rates. The Federal Reserve moved on Thursday to provide $1.5
trillion in short-term liquidity and changed the durations of
Treasuries it buys, but money markets show investors expect the
Fed will have to go even further to restore calm to financial
markets.
ECB President Christine Lagarde aggravated a market selloff
by saying it was not the central bank's job to close the spread
between the borrowing costs of various members, comments which
she later tried to roll back. Opinion was divided on the ECB's package, with analysts at
Commerzbank arguing that its decision "not to fire all pointless
Bazooka barrels" with a rate cut was a sensible choice and
predicted the euro was likely to recover.
"In times of crisis the ECB does not take extreme,
EUR-negative measures. Let us give the market a little more time
to get used to that," they said.
"Once it has done that it is likely to value the euro more
highly, reflecting the fact that a safe haven currency is
attractive to investors."
The euro EUR=EBS traded at $1.12035, following a 0.7%
decline on Thursday in the wake of the ECB decision. For the
week, the common currency is on course for a 0.7% decline.
Against the pound GBP=D3 , the dollar fell slightly to
$1.2596 on Friday, following its biggest one-day gain against
sterling since July 2016.
The dollar rose 1.1% to 105.81 yen JPY=EBS on Friday, on
course for a 0.5% weekly advance.
The greenback's rebound this week reflects its role as the
world's most liquid currency that investors seek in times of
stress.
The Fed meets next week and many analysts now expect the
central bank to chop its own target policy rate, quite possibly
to zero, and give markets new guidance about how it plans to
combat the economic fallout from the coronavirus.
The Bank of Japan, which will announce a policy decision
next week Thursday after the Fed, announced the unscheduled
purchase of 200 billion yen ($1.90 billion) in government debt
on Friday. It also said it would inject an additional 1.5
trillion yen in two-week lending in a sign of concern that
liquidity could dry up. Cross-currency basis swap spreads for the yen JPYCBS3M=
and the pound GBPCBS3M=ICAP fell on Friday after Thursday's
blow out.
The Australian AUD=D3 and New Zealand dollars NZD=D3
bounced around 1%. They were mauled on Thursday as investors
shunned riskier currencies that are linked to the global
commodities trade.