Dollar, yen buoyed as US banking sector fears put safe-havens back in vogue
SINGAPORE – The U.S. dollar and the yen, both safe haven assets, were mostly steady after spiking higher overnight as renewed concerns over the U.S. banking sector and economy dented risk sentiment.
The dollar index, which measures the currency against six major rivals, nudged 0.01 percent higher to 101.80 following a 0.5- percent increase overnight. The index is down 0.76 percent for the month.
Shares of First Republic Bank slid nearly 50 percent on Tuesday after it reported a more than $100 billion plunge in deposits in the quarter, battered by lost confidence in the banking sector.
It faces dwindling and tough options to turn around its business with the creation of a ‘bad bank’ or asset sales possibilities, a source familiar with the matter told Reuters.
More bank jitters as First Republic probes asset sales, ‘bad bank’ options -source
“The USD increase is the typical response to bad news, even if the bad news is based in the United States,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia. “While concerns about small U.S. banks remain, we expect the USD to stay elevated.”
The Japanese yen inched up 0.01 percent to 133.69 per dollar, after gaining about 0.4 percent on Tuesday. The traditional safe-haven gained 2.6 percent in March amid fears of a widespread banking crisis but has lost 0.6 percent for the month of April.
Also weighing on sentiment was fresh economic data. U.S. consumer confidence dropped to a nine-month low in April, data overnight showed, heightening the risk that the economy could fall into recession this year.
The U.S. Richmond Fed manufacturing index slid as well, down at -10 in April, the fourth straight month of contraction.
Markets are now pricing in a 76- percent chance of a 25-basis point hike when the Federal Reserve meets next week, CME FedWatch tool showed, down from a 90- percent chance at the start of the week.
Fed to deliver 25-basis-point hike in May, stay on hold rest of year – Reuters poll
The Federal Reserve will publish its internal review of its supervision of Silicon Valley Bank on Friday, the central bank said.
The review, which is being led by Fed Vice Chairman for Supervision Michael Barr, follows the regional bank’s abrupt failure last month. It will include policy recommendations and confidential supervisory information that the Fed typically does not disclose to the public, Barr has said.
The euro was up 0.04 percent at $1.0976, but has drifted away from the 10-month high it touched earlier this month. Sterling was last trading at $1.2411, up 0.02 percent on the day. The kiwi rose 0.15 percent to $0.615.
The Australian dollar was swinging between losses and gains after data showed inflation eased from 33-year highs in the first quarter, while core inflation dipped below forecasts.
ING economists said a cooler-than-estimated inflation report should be enough to “encourage thoughts that the recent pause in rate tightening by the Reserve Bank of Australia may end up being more than that, and confirm that 3.6 percent was the peak in rates this cycle.”
In cryptocurrencies, bitcoin climbed 1.2 percent to $28,315.40. Ethereum rose 0.4 percent to $1,867.70.
