Dollar demand rises via FX swaps as year-end rush eyed
LONDON, Nov 22 (Reuters) – Borrowing costs for U.S. dollars in currency derivatives markets rose on Monday to their highest levels in nearly a year, driven up by the year-end dollar funding rush and the euro’s steady slide against the greenback.
Spreads on three-month euro-dollar cross-currency basis swaps were at the widest since since December 2020 at around minus 27 basis points, implying that non-U.S. borrowers are prepared to pay that much premium to access dollar funding.
A cross-currency basis swap (CCBS) sees parties exchange interest rate payments in two different currencies and is often used by traders swapping liabilities to the desired currency.
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Corporates and asset management firms generally step up dollar buying as the end of the year approaches, with portfolio rebalancing and fund transfers requiring currencies like the euro and sterling to be converted to the…
