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A Dollar Funding Squeeze Is Spreading Across Global Markets

  • Dollar demand driven by U.S. bill sales, and ECB, BOE outlook
  • Japan funds buying foreign assets also look to hedge positions
Updated on

Borrowing dollars has gotten even more expensive in recent weeks and the squeeze is starting to show up in global money markets.

The premiums that investors have to pay to swap euros, pounds or yen into dollars for three months are close to their highest levels this year, as measured by cross-currency basis swaps. While there was a slight pullback at the end of July, the squeeze could have further to go as it’s being driven by a wide array of factors.