NEW YORK, Sept 30 (Reuters) - The cost to swap euros into dollars for three months in the currency market soared to its highest levels since 2012 on Friday as concerns grew about Deutsche Bank’s stability.
Deutsche Bank’s chief executive sought to reassure his staff on Friday that Germany’s largest lender remained robust after its shares again fell to record lows, sending tremors through global financial markets.
Deutsche, which employs around 100,000 people, has been engulfed by crisis after a demand for up to $14 billion earlier this month from the U.S. authorities for misselling mortgage-backed securities.
The cost to swap euros for dollars, measured by the three-month London interbank offered interest rate on dollars over the three-month interest rate on euros, was quoted about minus 64 basis points on Friday, the highest since July 2012, according to ICAP.
It was minus 33 basis points on Sept. 8.
The cross currency basis spread is seen as a measure of the demand of one currency relative to another.
The widening of the basis spread between the euro and the dollar suggests growing concern about the banking system in the eurozone.
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 W Simon