I read that recently, due to the covid-19, the pressure on the dollar market has risen significantly on the demand side. That is why the dollar basis became largly negativ.

https://www.bloomberg.com/news/articles/2020-03-17/how-cross-currency-basis-swaps-show-funding-stress-quicktake https://www.bis.org/publ/bisbull01.pdf

I tried to replicate this calculation for a university Essay. From the spot and 3M fwd rate I calculated the implied dollar interest rate. Then for the basis from this I extracted the 3M USD LIBOR. However my graph is looking like this:enter image description here It seems to me pretty the same, but on the positive side. Do I misinterpret it, if I say, it shows the premium which I have to pay, due I don't have access to direct us market, so I finance through the off-shore dollar market? Could someone explain me, whether I misunderstood something or am I using the wrong dataset. Thank you!


Basis is almost always calculated on the non-usd leg - which explains why your signs are the wrong way around.

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  • $\begingroup$ Thank you, meanwhile I also found that out. Yeah, that's correct, it explains it. I don't know, why I can't upvote you, but thank you. $\endgroup$ – Tamás F May 11 at 6:19

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