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FOREX-Dollar falls after Fed QE, on fiscal stimulus hopes

By Karen Brettell

(Adds quote, updates prices, new byline, changes dateline, previous LONDON) * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh By Karen Brettell NEW YORK, March 24 (Reuters) - The dollar fell broadly on Tuesday after the U.S. Federal Reserve on Monday committed to buy an unlimited amount of bonds and as investors were optimistic the American government would pass a stimulus package to offset the economic impact of the coronavirus pandemic. Against a basket of its rivals, the dollar fell 0.42% to 101.71. It is down from a more than three-year high of 102.99 on Friday. "The Fed's measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis," said Vasileios Gkionakis, head of FX strategy at Lombard Odier. The Fed on Monday announced various programs, including purchases of corporate bonds, guarantees for direct loans to companies and a plan to get credit to small and medium-sized business. While the Fed's latest measures were seen to have effectively broken the spreading freeze in the dollar funding markets in the short term, the shock to the real economy is expected to last for a far longer period. The U.S. Senate could pass a $2 trillion coronavirus economic stimulus package as soon as Tuesday, negotiators said, which analysts say is needed to blunt the economic harm from business shutdowns. Ulrich Leuchtmann, head of foreign exchange and commodity research at Commerzbank, said in a note that, as more economies enact draconian measures to lock down their economies, the global economy would be massively constrained in the near future and markets could quickly turn back into risk-off mode. "While we think that most currencies will eventually regain much of the ground that they have recently lost to the U.S. dollar, we don’t expect that process to start until the pandemic has clearly passed its worst," Oliver Allen, assistant economist at Capital Economics, said in a report. Against the dollar, the euro jumped 0.82% to $1.0809. Some more relief was also evident in dollar funding markets, with measures of short-term funding indicators such as euro-dollar FX swaps for three-month maturities stabilizing around 8 basis points after blowing out to more than 100 bps last week. The British pound also rose 1.72% to $1.1747, up from a 35-year low of $1.1413 set last week. The Australian dollar gained 1.53% to $0.5916, extending its recovery from a 17-year low of $0.5510 last week. ======================================================== Currency bid prices at 10:19AM (1419 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.0809 $1.0721 +0.82% -3.60% +1.0887 +1.0724 Dollar/Yen JPY= 111.1300 111.2000 -0.06% +2.09% +111.2800 +110.1000 Euro/Yen EURJPY= 120.12 119.30 +0.69% -1.50% +120.5200 +118.8400 Dollar/Swiss CHF= 0.9797 0.9845 -0.49% +1.23% +0.9850 +0.9720 Sterling/Dollar GBP= 1.1747 1.1548 +1.72% -11.40% +1.1790 +1.1511 Dollar/Canadian CAD= 1.4444 1.4496 -0.36% +11.23% +1.4532 +1.4375 Australian/Doll AUD= 0.5916 0.5827 +1.53% -15.74% +0.5974 +0.5813 ar Euro/Swiss EURCHF= 1.0588 1.0560 +0.27% -2.43% +1.0598 +1.0558 Euro/Sterling EURGBP= 0.9202 0.9286 -0.90% +8.85% +0.9326 +0.9191 NZ NZD= 0.5796 0.5720 +1.33% -13.97% +0.5839 +0.5693 Dollar/Dollar Dollar/Norway NOK= 11.0961 11.5363 -3.82% +26.40% +11.5981 +10.8613 Euro/Norway EURNOK= 11.9950 12.4180 -3.41% +21.93% +12.4770 +11.7980 Dollar/Sweden SEK= 10.1722 10.3150 -1.20% +8.82% +10.3722 +10.1223 Euro/Sweden EURSEK= 10.9961 11.1300 -1.20% +5.03% +11.1280 +10.9940 (Reporting by Karen Brettell; Additional reporting by Saikat Chatterjee in London; editing by Jonathan Oatis)