FOREX-Dollar surges on quarter-end flows; outlook robust

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, March 31 (Reuters) - The dollar climbed against a
swathe of currencies on Tuesday amid fiscal year-end demand by
Japanese firms while the Australian dollar slipped despite a
Chinese survey showing manufacturing returned to growth in
March.
Tuesday is the last trading day of Japan's fiscal year and
the end of the quarter for major investors elsewhere, which has
fuelled some volatility as big currency market players closed
their books. The bulk of those positioning changes caused the
dollar to strengthen.
"The talk is Japanese names are short of dollars, which is
likely to keep the dollar bid well into London time," said Yukio
Ishizuki, FX strategist at Daiwa Securities in Tokyo.
With news on the coronavirus front decidedly mixed as Italy
reported its slowest rate of new confirmed cases in two weeks
while the number of daily deaths in Spain jumped, investors
resumed purchasing the dollar.
Against a basket of six other currencies =USD , the dollar
rose 0.7% to 99.88. It reached 102.99, its highest in more than
three years, earlier this month as a global market selloff
fuelled a rush for dollars. Dollar demand has ebbed, but
analysts are still forecasting more dollar gains. the quarter, the dollar was the biggest gainer =USD ,
rising 2.5%. The Norwegian crown was the biggest loser NOK=D3 ,
falling 19% versus the greenback.
"The dollar is still in demand despite pressure easing on
risky assets and with liquidity far from average, the main thing
to watch today should be month-end quarter-end rebalancing,"
said Stephen Innes, chief market strategist at financial
services firm AxiCorp.
The dollar rose 0.7% to 108.60 yen JPY=EBS on Tuesday. The
Chinese yuan CNY=CFXS CNH=D3 was the only currency to buck
the trend, holding firm against the dollar in both the onshore
and the offshore market.
China's official manufacturing Purchasing Manager's Index
unexpectedly showed activity swung to expansion in March.
China's economy is still expected to see a large contraction in
the first quarter. While the Chinese currency stood firm against the dollar,
the Australian dollar weakened, down 1.3% percent to $0.609.
The euro EUR=EBS fell 1% to $1.0927 and sterling GBP=D3
declined 0.6% to $1.2347.
Broader market gauges of dollar funding and market
volatility also declined from multi-year highs on Tuesday.
Three-month currency swaps in euro-dollar EURCBS3M=ICAP
flipped into a rare premium against the dollar.
Those volatile moves are probably a function of quarter-end
flows rather than pointing to any structural imbalances in the
FX markets, according to Kenneth Broux, a currency strategist at
Societe Generale in London.

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