But global restrictions on movement and the continued spread of the coronavirus are outweighing the responses from policymakers, according to analysts at UBS Global Wealth Management CIO.
“In the absence of credible signs that infection numbers in the western world can be controlled, volatility is likely to remain elevated,” they wrote in a research note.
The dollar’s strength
The US dollar, meanwhile, jumped to a record high against the Mexican peso. The greenback also rose against the Japanese yen — a traditional safe haven currency — to its highest level since February.
Currencies elsewhere in Asia weakened Thursday, too.
“The strong US dollar is slamming global capital markets like a sledgehammer today,” wrote Stephen Innes, global chief markets strategist at AxiCorp. He added in a research note that the “unbridled” demand for the world’s reserve currency is causing extreme weakness in the Australian and New Zealand dollar, as well as the Korean won.
Central banks in emerging markets are also in a “world of pain,” Innes said, as they can’t justify selling reserves of the dollar when their local banks are seeing a rise in demand for the currency.
“That merely signals more [US dollar] strength to come as the buying frenzy continues,” he added.
Central banks take dramatic steps
Equity markets, meanwhile, don’t seem to have been helped much by the flurry of steps taken worldwide by central banks to stave off catastrophic economic turmoil. News of the European Central Bank’s massive economic rescue plan only managed to prop up stocks for a couple of hours before they sank again.
Other central banks also detailed new plans during daytime hours in Asia, with little effect on stock markets. The US Federal Reserve, for example, said it would enhance liquidity for critical money markets.
And the Reserve Bank of Australia announced it would cut rates to 0.25%, also in a bid to manage the coronavirus fallout. Other banks will likely follow, according to Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.
“The central banks of Indonesia, Taiwan and the Philippines all meet today, and universally, I expect them all to cut rates,” he wrote in a research note. “Unfortunately, it will come just as pressure on their currencies reaches a frenzied level, but it will be the lesser of two evils.”
— Clare Duffy, Jake Kwon and David Goldman contributed to this report.