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Currency Market Analysis

Mar 23, 2020 | Currency Market Analysis

Global Themes

Greenback regains strength as market focuses on funding

The US dollar ended last week with another volatile session as a coordinated effort from global central banks relived the buying pressure the US dollar.

The greenback surged higher last week as businesses and investors tried to secure US dollar holdings via markets and directly through banks.

The rush for US dollar saw the USD index climb to the highest level in three years. The USD index’s 4.2% rise last week was the largest one-week gain since 2008 (source: Reuters).

The Federal Reserve – along with the European Central Bank, Swiss National Bank and others – said they would increase the frequency of key USD swap operations from weekly to daily.

The move was the latest in a series of actions to calm markets.

Safe havens

US share futures started lower on Monday with the S&P 500 futures trading "limit down" after a 5.0% fall on the open.

The uncertain start saw the US dollar strengthen.

The euro and Japanese yen also gained.

The new week started more activity from central banks after the Reserve Bank of New Zealand announced it would also launch a new quantitative easing program – also known as money printing.

As we saw last week, central bank action will be key, along with a close focus on government actions—both in terms of efforts to contain the spread of coronavirus and programs to provide support economies.

The focus also remains on the coronavirus spread with US and Europe continuing to see a significant increase in numbers.

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