FOREX-Dollar spikes to 3-year highs as coronavirus fears fuel funding crunch

* Dollar index hits highest level since April 2017
* Sterling, Aussie, kiwi hit multi-year lows vs greenback

(Updates to U.S. afternoon)
By Saqib Iqbal Ahmed
NEW YORK, March 18 (Reuters) - The dollar soared across the
board on Wednesday, hitting multi-year highs against several
major currencies, as companies and investors worried by the
coronavirus outbreak rushed to the perceived safety of the U.S.
currency.
The dollar index =USD , which measures the greenback's
strength against a basket of six other major currencies, rose
about 1.69% to 101.08, its highest since April 2017. The index
was on pace for its largest one-day jump since June 24, 2016.
A slew of currencies hit multi-year lows against the dollar,
including the British pound, the Australian dollar and the New
Zealand dollar.
Signs of stress were everywhere as global central banks
resumed efforts to keep money markets functioning normally.
"In a similar vein to consumers emptying the shelves at
grocery stores, investors and companies are treating the
greenback the same way, gobbling it up given its highly liquid
status," said Joe Manimbo, senior market analyst, at Western
Union Business Solutions in Washington.
The dollar has soared against its peers in recent days
despite two emergency interest rate cuts by the U.S. Federal
Reserve this month that have brought U.S. rates down to zero.
The dollar index is up more than 6% over the last seven trading
sessions.
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 coordinated 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.
"Although aggressive measures by the central banks to ensure
liquidity and the restoration of lines such as the Fed's
commercial paper funding facility are all aimed at stemming the
panic, it is likely that the USD will remain strong until there
are signs that the coronavirus crisis has been contained," Jane
Foley, senior FX strategist at Rabobank, said in a note.
The Fed 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 sank to a fresh 17-year low of $0.5702
on Wednesday, while the New Zealand dollar hit a near 11-year
low of $0.5697 cents.
Sterling fell 3.73% to $1.16, its lowest since the pound's
so-called 'flash crash' in October 2016.
Even other perceived safe-haven currencies struggled against
the greenback, with the Japanese yen JPY= down 0.4% and the
Swiss franc down about 0.8%.
The Canadian dollar CAD= weakened to a four-year low
against the greenback on Wednesday as oil prices tumbled.
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Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
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