Dollar demand picks up sharply as turmoil in banks rattles investors

LONDON (Reuters) – Demand for U.S. dollars in the currency derivative markets surged on Friday to its highest since mid-December, after a meltdown in U.S. banking stocks ignited a wave of investor risk aversion.

Three-month euro/dollar cross currency basis swap spreads traded as negatively as -17 basis points, the most since December 14, reflecting a pickup in demand for hard cash. They were last trading at -14.

An index of European banks was heading for its biggest one-day fall since last June, as shares in the region’s biggest lenders dropped in sympathy with a steep decline in the value of Wall Street’s biggest lenders on Thursday.

(Reporting by Amanda Cooper; Editing by Dhara Ranasinghe)