US dollar posts biggest weekly fall since 2009

NEW YORK • The US dollar posted its biggest weekly decline in more than a decade last Friday, as trillions of dollars worth of stimulus efforts by governments and central banks helped temper a rout in global markets driven by the coronavirus pandemic.

The dollar had surged this month as tumbling stock and debt markets caused a scramble for the world's most liquid currency.

But big government spending pledges and coordinated efforts by central banks around the world to increase the supply of dollars have supported a rally in other major currencies.

The United States House of Representatives last Friday approved a US$2 trillion (S$2.85 trillion) aid package - the largest in American history - to help people and businesses cope with the economic downturn inflicted by the pandemic.

The dollar dipped 0.87 per cent against a basket of currencies to 98.41 last Friday. It fell 3.9 per cent last week - its biggest weekly decline since March 2009. The dollar index in the week before last had racked up its biggest weekly gain since the financial crisis.

"What we are seeing is abating stress in the money markets. Action by central banks has been successful so far and a shortage of dollars has been taken off the table," said Commerzbank head of FX and commodity research Ulrich Leuchtmann.

After this month's large price swings, investors are likely to be especially active in rebalancing their books for the month end and quarter end.

The Global Foreign Exchange Committee last Thursday warned that the coming few sessions could be volatile as market participants execute larger than normal trades as part of this process.

Against the yen, the dollar fell 1.56 per cent last Friday to 107.87 yen, as Japanese investors and companies repatriated funds before their fiscal year ends this week.

The euro gained 0.83 per cent against the greenback to US$1.11.

Sterling jumped 2.07 per cent to US$1.25 and the Australian dollar rose 1.78 per cent to 62 US cents.

Speculators increased their net short-dollar position last week to US$8.88 billion, from US$8.27 billion the week before last, according to Reuters calculations and US Commodity Futures Trading Commission data released last Friday.

"Now that the surge in demand for dollars overseas has been met by the (US Federal Reserve's) new improved swap lines, economic and medical fundamentals are taking over," BDSwiss Group head of investment research Marshall Gittler said in a note last Friday.

Wall Street stocks also tumbled last Friday, ending a massive three-day surge after doubts about the fate of the US economy resurfaced and the number of coronavirus cases in the country climbed. The number of US cases has passed 124,000, and the death toll has exceeded 2,200.

The Dow Jones Industrial Average sank 4.1 per cent, or 915 points, to 21,636.78.

The broad-based S&P 500 dropped 3.4 per cent to 2,541.47, while the tech-rich Nasdaq Composite Index tumbled 3.8 per cent to 7,502.38.

REUTERS, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 30, 2020, with the headline 'US dollar posts biggest weekly fall since 2009'. Print Edition | Subscribe