US dollar shortage in March threatened to spark off another financial crisis

Tightness in greenback - not seen even in global financial crisis - led MAS to weigh contingencies for fresh meltdown

Published Thu, Jun 11, 2020 · 09:50 PM

Singapore

THE severe stresses in the global financial markets in just about two weeks in March were enough for the Monetary Authority of Singapore (MAS) to dust off contingency plans for another financial crisis.

It gives a sense of the "great anxiety and stress" that reflected a tightness in dollar funding not seen even in the global financial crisis - though decisive action by the US Federal Reserve in establishing swap lines with central banks such as MAS helped to turn that around.

Managing director of the MAS Ravi Menon recounted this in a recent interview with the Institute of International Finance (IIF) in discussing the risks posed by the Covid-19 crisis.

He pointed to the severe stresses in March in the corporate bond market, especially the US commercial paper market, which is a market used quite actively for dollar funding by bu…