* Major dollar peers hit multi-year lows as investors dump
assets
* Dollar funding shortages hit longer-maturity segments
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, March 19 (Reuters) - The euro plunged to its lowest
level in three years on Thursday as demand for dollar funding
stayed high despite the recent burst of liquidity injection
operations undertaken by central banks around the world.
In volatile trading the euro EUR=EBS fell 1.6% to $1.0726
per dollar, its lowest since April 2017, as traders rushed to
dump euro positions despite a fresh round of stimulus from the
European Central Bank.
The fall in the euro mirrored a sudden widening in FX
implied borrowing costs for the U.S. dollar, indicating that
investors were rushing to secure their short-dated funding.
"There are still fears about refinancing of European debt in
US dollars," said Ulrich Leuchtmann, head of FX and commodity
research.
"The swap facilities should normally give access to euro
funding. But I think this is not calming down the market.
There's a general assumption that there are a lot of US funding
needs, not just in Europe but also around the world as a whole."
Though the European Central Bank announced a 750 billion
euro ($817 billion) asset-purchase programme in response to the
coronavirus outbreak, currency traders were not impressed.
The euro's plunge boosted the dollar's value against a
basket of its peers.
NOT ENOUGH
Sterling GBP=D3 teetered near its lowest point since at
least 1985 against the greenback, while the Australian dollar
AUD=D3 tumbled to a 17-year low and the New Zealand dollar
NZD=D3 was at its weakest in 11 years as investors dumped
riskier assets.
"Central banks are stepping up their liquidity actions but
it is not enough to make sure the dollar scarcity disappears,
and as a result the dollar continues to be the favoured currency
across the board," said Manuel Oliveri, a currency strategist at
Credit Agricole in London.
The ECB's purchase scheme, announced after an emergency
meeting late on Wednesday, came less than a week after
policymakers launched fresh stimulus measures. The dollar =USD firmed to 102.30 against other currencies,
its highest level since March 2017. It has gained more than 7.5%
in the past nine trading sessions.
On an eight-day rolling basis, it is on its biggest rise
since September 1992.
Though global central banks have pumped in billions of
dollars in emergency liquidity injections in recent days and
strengthened swap lines with some global central banks, dollar
funding pressures remained exacerbated across the board.
Investors are selling what they can to keep their money in
dollars due to the unprecedented amount of uncertainty caused by
the coronavirus pandemic, which threatens to paralyse swathes of
the global economy.
Kit Juckes, a strategist at Societe Generale in London, said
that though there has been an improvement in the front end of
the dollar liquidity curve, longer tenor funding in some corners
of the market remained high.
In New Zealand for example, one-year FX swaps NZDCBS=ICAP
remained at their highest levels in nearly two decades,
according to Refinitiv data.
The broad rush for cash dollars has forced investors to
unload Treasuries and other government bonds as well as gold.
This has confounded many analysts because investors normally
buy government debt and precious metals in times of uncertainty.
Elsewhere, the Swiss franc edged higher against the euro
EURCHF=EBS after the ECB's move, as investors had expected the
ECB to keep rates on hold, though the franc remained within
striking distance of a July 2015 high hit overnight at 1.0532
francs per euro.
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