Forwards spreads fall but won’t hit January levels, say traders
While bid/offers have shrunk since March’s highs, dealers expect them to remain elevated
The Federal Reserve’s US dollar swap lines have helped reduce bid/offer spreads in the foreign exchange forwards market that had soared during the volatility in March, but traders believe they will remain elevated above January levels for some time.
When market conditions started to deteriorate at the beginning of March, the head of FX forwards at one US dealer says that spreads “massively increased” – in particular, dollar/yen forwards spreads were said to be almost 20 times wider than usual
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