How much has the Fed swap lines helped to ease the situation?
At the height of the squeeze last week, the EUR/USD 3-month basis swap blew up to its widest level since 2011 but since then it has calmed down considerably as seen above.
And while that is largely reflected in the price action of the dollar over the past few days - helped by the Fed with their fresh and enhanced swap lines as well as unlimited QE - it is not the case for all offshore markets that are seeking dollar funding.
As you can see above, the yen-dollar 3-month basis swap continues to be much, much wider than it usually is - currently at 97 bps. And this comes even after the fact that Japanese banks took up a record amount of dollars in funding operations yesterday here.
These operations definitely help to alleviate the pressure but they also give a feel of the market and the need for dollars across the globe.
If anything, I would argue that while the funding pressures have been relaxed, all it takes is a hiccup or two in the market to reignite the flames and the squeeze once again.
And if you consider that some offshore markets are still exhibiting signs of funding stress, it is tough to so quickly associate the recent dollar decline with a potential dollar demise.
