Dollar Funding Strains Return Amid Blow-Out in FX Volatility
- Cross-currency basis eases as banks get $112 billion via swaps
- Commercial-paper rates rose to a record versus OIS on March 17
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Strains in dollar funding markets re-emerged late Wednesday after global currency markets turned suddenly illiquid as U.K. authorities considered locking down London, the center of foreign-exchange trading.
Cross-currency basis swaps for the euro-dollar pair, a proxy for how expensive it is to acquire the greenback, showed renewed signs of stress following a brief reprieve. On Tuesday, they touched levels last seen in 2011, before euro-area banks took $112 billion made available through a special central bank operation, providing a brief period of respite.