NEW YORK - The dollar eased on Friday as six major central banks announced a coordinated action to enhance liquidity in the currency, but bounced off its lows in afternoon trading as stocks weakened.

The greenback has staged a ferocious rally this week as investors scrambled to obtain the currency, gaining 4.32% in its biggest weekly rise since the 2008 financial crisis.

Currencies from the Australian dollar to the British pound tumbled to multi-year lows after coordinated rate cuts by central banks and billions of dollars of fund injections failed to calm panicky markets.

On Friday six major central banks announced coordinated action to enhance liquidity in the greenback by increasing the frequency of their currency swap operations to occur daily.

"The enhancement of coordinated USD dollar liquidity operations on 15 March was already a significant step building on the experience of the Great Financial Crisis, but today’s shift to daily operations is unprecedented," said  Frederic Ducrozet, a strategist at Pictet Wealth Management.

The U.S. dollar rose to 1.03, the highest since January 2017, against a basket of currencies through a week when investors have liquidated everything from stocks to bonds to gold and commodities.

It was last 102.65, down 0.32% on the day. 

“For many countries with borrowings in dollars, the massive depreciation in their domestic currencies, and strength in the dollar, has been increasingly threatening at a time when most emerging market and developed-world economies are either headed to or are already in recession,” analysts at Action Economics said on Friday in a report.

Gauges of expected market swings in the euro for one-month maturities edged lower, after hitting a more than three-year high on Thursday.

Some funding indicators, however, showed continuing strains in the market.

The premium over interbank rates that investors were paying to swap yen for one-year dollar funding fell on Friday but remained at elevated levels at around 55 basis points.

The FRA-OIS spread <USDF-O0X1=R>, a barometer of risk in the interbank market, edged higher on Friday to 99 basis points.

"While FX volatility is lower and currency basis swaps are less scary for example, the situation remains stressed," said Kit Juckes, a strategist at Societe Generale in London.

========================================================

Currency bid prices at 4:00PM (2000 GMT)

 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid

                                              Previous                   Change                 

                                              Session                                           

 Euro/Dollar      EUR=        $1.0669        $1.0690     -0.20%         -4.84%      +1.0831     +1.0638

 Dollar/Yen       JPY=        111.1100       110.6900    +0.38%         +2.06%      +111.5000   +109.3200

 Euro/Yen         EURJPY=     118.53         118.35      +0.15%         -2.80%      +119.2900   +117.8600

 Dollar/Swiss     CHF=        0.9873         0.9858      +0.15%         +2.01%      +0.9903     +0.9746

 Sterling/Dollar  GBP=        1.1582         1.1485      +0.84%         -12.65%     +1.1932     +1.1414

 Dollar/Canadian  CAD=        1.4394         1.4510      -0.80%         +10.84%     +1.4536     +1.4151

 Australian/Doll  AUD=        0.5805         0.5741      +1.11%         -17.32%     +0.5986     +0.5666

 ar                                                                                             

 Euro/Swiss       EURCHF=     1.0531         1.0541      -0.09%         -2.96%      +1.0557     +1.0527

 Euro/Sterling    EURGBP=     0.9209         0.9308      -1.06%         +8.92%      +0.9338     +0.8998

 NZ               NZD=        0.5687         0.5671      +0.28%         -15.57%     +0.5880     +0.5613

 Dollar/Dollar                                                                                  

 Dollar/Norway    NOK=        11.6938        11.2486     +3.96%         +33.21%     +11.9357    +10.8044

 Euro/Norway      EURNOK=     12.5795        12.0280     +4.59%         +27.87%     +12.7980    +11.6061

 Dollar/Sweden    SEK=        10.4134        10.3884     +0.02%         +11.40%     +10.4290    +10.2151

 Euro/Sweden      EURSEK=     11.1070        11.1048     +0.02%         +6.09%      +11.1356    +10.9785

 (Additional reporting by Saikat Chatterjee and Dhara Ranasinghe in London Editing by Marguerita Choy and Tom Brown)

© Reuters News 2020