Dollar maintains gains after weeks of rallying

• The euro traded down 0.4pc at $1.0916 as the dollar advanced.
• The greenback also rose against the Japanese yen, trading last up 0.2pc at 107.33 yen, though the Japanese currency protected well its safe-haven status this week.

LONDON: The US dollar firmed on Thursday but paused its strong rally of recent weeks after the Federal Reserve made it easier for other central banks to swap their currencies for dollars.

Markets were spooked after US President Donald Trump's media briefing late on Tuesday in which he warned Americans of a painful two weeks ahead in fighting the coronavirus, even with strict social distancing measures.

Still, analysts do not expect the dollar rally seen in recent weeks to continue further, following the Federal Reserve measures in March.

The cost to borrow dollars in the euro and yen funding markets fell considerably after the Fed liquidity injections, with three-month FX swap spreads snapping back from 2008, global financial crisis levels last month.

Costs blew out in mid-March as stress in the dollar funding market caused by the coronavirus pandemic lead to a global scramble to secure dollar funds.

The euro traded down 0.4pc at $1.0916 as the dollar advanced.

The greenback also rose against the Japanese yen, trading last up 0.2pc at 107.33 yen, though the Japanese currency protected well its safe-haven status this week, advancing against its US counterpart.

The Fed's efforts to improve dollar liquidity have turned out to be beneficial for other currencies too, such as the Norwegian crown, which advanced further on Thursday to hit a three-week high of 11.1820 against the euro. It was last trading up 1.8pc at 11.26

"The Norwegian crown is the least liquid currency in the G10 space so when a crisis hits, it gets hammered. So the improvement in dollar funding has already started manifesting itself in the crown, which has rallied sharply so far this week," said Petr Krpata, chief EMEA FX and IR strategist at ING.

On top of that, "the crown is the cheapest currency in the G10 space", therefore it is appealing from that front as well, he said.

To combat the economic slowdown inflicted by the pandemic, the Fed said on Wednesday it was temporarily easing its leverage rules for large banks by exempting certain investments from a key leverage calculation.