Sun, May 28, 2023

Steady dollar and retreating yen amidst regulatory actions

Dollar, Aussie, Kiwi, monetary policy

The dollar was steady, and the yen retreated from a seven-week high as investors assessed the actions of authorities and regulators to contain the crisis in the global banking system.

The dollar index retreated 0.08% to 103.02, advancing 0.6% on Friday amid worries in the European banking sector.

On Monday, the Federal Deposit Insurance Corp. said First Citizens BancShares Inc would buy all Silicon Valley Bank’s deposits and existing loans from the regulator. That helped ease panic spreading across Europe, with an index of European banking shares down 1.52%, led by Deutsche Bank, which advanced 4.33% after retreating 8.5% on Friday.

The yen hit a seven-week high of $129.65, and the currency was on track to gain about 3.8% in March. The last reading was at $131.44.

The US Federal Reserve increased interest rates by 25 basis points on Wednesday. However, Fed Chairman Jerome Powell has opened the way for further rate hikes if necessary.

Markets are pricing about a 55% chance that the Fed will hike interest rates at its next meeting in May and expect a rate hike of several points in early July.

Markets for this period are priced up by more than 40 basis points from the European Central Bank for the summer and will not taper until the end of the year.

In key weekly inflation statistics, the euro advanced 0.16% to $1.0774 after retreating 0.6% on Friday.

Moreover, the sterling was at $1.2268, up 0.32% daily, having retreated 0.5% on Friday.

The president of the Minneapolis Fed said on Sunday that the recent volatile situation in the banking sector and the possibility of a further credit crisis had brought the US several steps closer to recession.



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