WASHINGTON/LONDON - The dollar surged on Thursday as extraordinary steps by central banks across the world to stem a coronavirus-induced financial rout saw mixed success, boosting bonds but failing to halt losses in stocks.

The Federal Reserve opened the taps for central banks in nine countries to access dollars in hopes of preventing the epidemic from causing a global economic rout.

The Fed said the swaps, in which the US central bank accepts other currencies as collateral in exchange for dollars, will be in place for at least the next six months.

The swaps will allow the central banks of Australia, Brazil, South Korea, Mexico, Singapore, Sweden, Denmark, Norway and New Zealand to tap up to a combined total of US$450 billion to help ensure the world’s dollar-dependent financial system function.

The Bank of England cut interest rates to 0.1 percent on Thursday, its second emergency rate cut in just over a week, and ramped up its bond-buying program in a fresh attempt to shield Britain’s economy from the coronavirus outbreak.

The BoE’s Monetary Policy Committee voted unanimously for the cut to the benchmark rate - which had been slashed to 0.25 percent on March 11 - and for a 200 billion-pound increase in the central bank’s bond-buying program to 645 billion pounds (US$752 billion).

US stocks continued their slide on Thursday, with the S&P 500 opening down 1.87 percent by 9:52 a.m. ET, but turned higher after about an hour of trading. A market meltdown has pushed Wall Street’s three main indexes down about 30 percent from their record closing highs last month and at one point erased the Dow industrials’ gains since US President Donald Trump’s 2017 inauguration.

The dollar has gained as investors rushed to secure liquidity, pushing the British pound down 0.9 percent to its lowest since 1985 and rising 1.3 percent against major currencies to its highest since March 2017.

Bond markets stabilized somewhat after the European Central Bank pledged late on Wednesday to buy 750 billion euros (US$820 billion) in sovereign debt through 2020.

That brought the ECB’s planned purchases for this year to 1.1 trillion euro, with the new purchases alone worth 6 percent of the euro zone’s GDP.

Government bond yields in Italy and across the euro zone dropped after the ECB’s emergency measures, though European stocks fell back into negative territory after arresting their rout in early trading.

“The announcement (the ECB) has made has gone some way to comforting markets that borrowing costs in those economies won’t be allowed to spiral higher,” said Mike Bell, global market strategist at J.P. Morgan Asset Management.

Europe’s broad Euro STOXX 600 fell 0.9 percent after gaining more than 1 percent in early trading. Indexes in Frankfurt, Paris and London’s FTSE all saw advances wiped out.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan slumped by 4 percent. South Korea and China's Taiwan led the losses as the index plunged to a four-year low, with circuit breakers triggered in Seoul, Jakarta and Manila.

Expected price swings for some of the world’s biggest currencies rocketed to multi-year highs as the demand for dollars forced traders to dump currencies across the board.

For the British pound versus the dollar, expected volatility gauges leapt to 24.4 percent, their highest level since before the 2016 Brexit vote.

“One unresolved and really critical issue is what’s going on in volatility,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. “I think that volatility needs to stabilise before the broader market can heal.”

MSCI’s world equity index, which tracks shares in 49 countries, shed 0.72 percent.

ITALIAN YIELDS FALL

Italy, which has seen its borrowing costs jump in recent days, led the drop in yields after the ECB move.

Its two-year bond yields slumped by than 100 basis points to 0.41 percent, heading for their biggest one-day fall since 1996. Italy’s 10-year bond yields slid as much as 90 bps to 1.40 percent.

The gap over the safer German Bund’s yields tightened almost 100 bps from Wednesday’s closing levels and were set for the biggest daily drop since the 2011 euro one crisis.

Markets elsewhere failed to respond to central bank action. Before the ECB move, the US Federal Reserve promised a liquidity facility for money market mutual funds and the Bank of Japan made two unscheduled bond purchases totalling 1.3 trillion yen (US$12 billion).

The Australian central bank slashed interest rates to a record low of 0.25 percent.

Traders reported huge strains in bond markets, however, as distressed funds sold any liquid asset to cover losses in stocks and redemptions from investors.

Benchmark 10-year sovereign bond yields in New Zealand, Malaysia, South Korea and Singapore and Thailand surged as prices fell, and US 10 year Treasuries rose 10 basis points through the session.

“Not only central banks but governments are throwing everything at the economy right now, but markets aren’t responding,” said Luca Paolini, chief strategist at Pictet Asset Management.

Commodities also fell as the virus outbreak worsened. The pandemic has killed almost 9,000 people globally, infected more than 218,000 and prompted widespread emergency lockdowns.

Gold fell 0.8 percent, and like other assets was buffeted by volatility. Copper hit its down-limit in Shanghai, and benchmark futures traded in London fell to their weakest in over four years.

Oil jumped after an overnight plunge to an 18-year low in Asian trade. Brent was up US$1.01 to US$25.89.

Underlining expectations of severe economic damage from the pandemic, J.P. Morgan economists forecast the US economy will shrink 14 percent in the next quarter and the Chinese economy will lose more than 40 percent on an annualised basis in the current one.

“There is no longer doubt that the longest global expansion on record will end this quarter,” they said in a note. “The key outlook issue now is gauging the depth and the duration of the 2020 recession.”