The dollar eased on Friday after a rally that put it on track for its biggest weekly rise since the 2008 financial crisis, as a global scramble for dollar funding sent other currencies reeling. Currencies from the Australian dollar to the British pound tumbled to multi-year lows this week, after coordinated rate cuts by central banks and billions of dollars of fund injections failed to calm panicky markets.
But Friday restored some calm after days of selling. "The dollar has taken a rotation lower following interventions and the threat of interventions over the last day," analysts at Action Economics said in a report on Friday. From Brazil to Norway, policymakers are leaping to defend their currencies against the onslaught of the dollar.
On Friday six major central banks announced a coordinated action to enhance liquidity in the greenback by increasing the frequency of their currency swap operations. "For many countries with borrowings in dollars, the massive depreciation in their domestic currencies, and strength in the dollar, has been increasingly threatening at a time when most emerging market and developed-world economies are either headed to or are already in recession," Action Economics said.
The US dollar is up about 4% against a basket of currencies through a week when investors have liquidated everything from stocks to bonds to gold and commodities. At its three-year peak of nearly 103 hit overnight, the dollar was up more than 5%, its biggest weekly gain since October 2008. Sterling was among the major gainers, rising 3.42% from a 35-year low to $1.1878.
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