The ongoing tensions between the Middle East and US have led to a strong demand for dollars, which has driven down cross-currency basis rates. According to UBS, the JPYUSD cross-currency basis dropped 1bp earlier Thursday and another 1bp during the London session. The EURUSD basis is also down 1bp along the curve, while the GBPUSD basis is down 0.5bp. In addition, the EMEA cross-currency basis was offered straight from the open and continued to grind gradually wider during the day, with only a partial reversal after US regulators unveiled plans to ease bank capital rules.

Meanwhile, CHFUSD basis is facing pay-side resistance in longer tenors. With issuance supply halted amidst volatility, there is less pressure from end user flow to widen the long end of CHFUSD cross-currency. As a result, moves lower are being driven by the short end.

The rising demand for dollars has been a key driver of these movements in cross-currency basis rates. This trend is likely to continue in the near term, as investors seek safe-haven assets in times of geopolitical uncertainty. However, it’s important to note that the situation in the Middle East could still have an impact on currency markets, and investors should remain vigilant for any further developments.