Money-market roller coaster must contend with stock trades too

LONDON: Thank the US stock swoon for easing pressure on a key corner of besieged global money markets – the cross-currency basis. It may even help flip the axis for dollar premiums around the world, pushing them into positive territory.

A drop in investor demand for equities may have been a catalyst for the recent narrowing in cross-currency basis – a part of the cost of hedging for foreign investors buying US assets. That dynamic has helped offer some relief as short-term dollar interest rates have risen to crisis-era highs, according to one Wall Street money-market guru.