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MONEY MARKETS-Cost to borrow dollars jumps to two-month high
September 29, 2016 / 6:41 PM / in a year

MONEY MARKETS-Cost to borrow dollars jumps to two-month high

NEW YORK, Sept 29 (Reuters) - The cost to borrow three-month U.S. dollars in the currency market jumped to its highest levels in almost two months on Thursday as concerns grew about Deutsche Bank’s stability.

Deutsche Bank said on Thursday it was confident that the vast majority of its trading clients understand the group has a stable financial position, after Bloomberg reported that some funds had withdrawn excess cash and positions held with the bank.

Germany will not help ailing lenders such as Deutsche Bank, senior lawmakers in Chancellor Angela Merkel’s conservative bloc said on Thursday, as resistance grew to any possibility of staging a rescue.

The cost premium, measured by the three-month London interbank offered rate on dollars over the three-month rate on euros, was quoted about minus 53 basis points on Wednesday, the highest since July 29, according to ICAP.

It was minus 33 basis points on Sept. 8.

The cross-currency basis swap is a measure of demand for dollars, or an indicator of a surfeit of euros.

Banks and hedge funds use the swaps for currency bets, while U.S. companies use them to hedge their non-dollar denominated bonds.

During the global credit crisis, demand for the greenback soared as dollar lending came to a near halt with the three-month basis swap spread hitting minus 305 basis points.

At the height of the euro zone crisis in 2011, the gauge was at minus 160 basis points.

Reporting by Karen Brettell and Richard Leong; Editing by Chizu Nomiyama

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