Cross-Currency Swap Premium Rises Seventh Day as Banks Pull Back
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The premium that European lenders pay to obtain dollar-denominated cash flows increased for a seventh day as global central banks said they’ll wind down emergency funding programs.
The rate on a three-month cross-currency basis swap between euros and dollars was negative four basis points, after reaching positive 4.8 basis points Jan. 16. A negative swap rate signals traders are paying a premium to trade euro-based cash flows for comparable flows denominated in U.S. dollars. Investor demand for safety increased amid a deepening selloff in emerging-market currencies.