FOREX-Dollar rockets to 3-year highs as coronavirus fears fuel funding scramble

* Dollar index hits highest level since April 2017
* Sterling, Aussie, kiwi hit multi-year lows vs greenback
* High demand for Cbank USD dollar operations
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Iain Withers
LONDON, March 18 (Reuters) - The dollar surged to a
three-year high against major currencies on Wednesday, as
companies and investors worried by the coronavirus outbreak
rushed to the safe haven of the world's most liquid currency.
The greenback hit its highest level since April 2017,
breaking 100 against a basket of currencies =USD . The index
has gained more than 5% in a little over a week and on a
seven-day rolling basis had notched up its biggest rise since
the dark days of the global financial crisis in November 2008.
A slew of currencies hit multi-year lows against the U.S.
dollar, including the British pound, the Australian dollar and
the New Zealand dollar. The Norwegian crown hit a fresh record
low of $10.6356. NOK= .
Signs of stress were everywhere as global central banks
resumed their efforts to keep money markets functioning
normally.
The European Central Bank, the Bank of England and the Swiss
National Bank all held dollar liquidity sales on Wednesday, as
part of the biggest co-ordinated funding injection by central
banks since the 2007-09 financial crisis. The high demand in these auctions settled some nerves in
money markets but some analysts said that given the widespread
nature of the dollar shortage, the Fed's swap lines with the
major central banks may not be enough.
"There was a concern that people wouldn't take this up
sufficiently because of stigmatisation fears. We saw that in
2008. Now we are obviously in a situation where this is not a
problem," said Ulrich Leuchtmann, head of FX and commodity
research at Commerzbank.
"On the other hand you could see it in a negative way that
the situation is so severe no-one cares what it looks like."
He added: "We have a lot of strain at the moment and we
might have problems popping up where we don't expect them. But
I'm quite confident that this isn't the problem that will create
systemic risk."
The U.S. Federal Reserve said on Tuesday it would reinstate
a funding facility used during the 2008 financial crisis to get
credit directly to businesses and households. Markets have crumbled this month as investors liquidated
nearly everything for cash - driving up the dollar's value and
the cost of borrowing the greenback abroad.
Export exposed currencies fared particularly badly versus
the greenback.
The Australian dollar sunk to a fresh 17-year low of
$0.59110 on Wednesday, while the New Zealand dollar hit a decade
low of $0.5841 cents.
Meanwhile sterling fell 1.9%, falling below $1.19 to its
lowest level since the pound's so-called 'flash crash' in
October 2016.
Only perceived safe-haven currencies managed to hold their
ground against a strengthening greenback, with the safe-haven
yen up around a third of a percent to 107.30 yen JPY=EBS while
the Swiss franc edged up 0.1% to $0.96055 francs.
"This is a story of a strong dollar. The Fed's action was
better than doing nothing, but at the same time the focus is on
signs of when this crisis will end," said Jane Foley, senior FX
strategist at Rabobank.
"Everyone understands the shortfalls of central banks. They
can't actually physically get people back through the doors of
shops."

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