Forex: Dollar gains against yen as banking fears ease

First Citizens Bancshares (Tennessee)

27/03/2023 15:09

(Updates prices and market activity; adds comments; changes
dateline, previous LONDON)
    By Saqib Iqbal Ahmed
       NEW YORK, March 27 (Reuters) - The dollar rose to a
two-day high against the Japanese yen on Monday as authorities'
efforts to rein in worries over the global banking system helped
calm investor nerves. 
    The U.S. currency, however, traded in a narrow range against
most major currencies as investors appeared hesitant to place
big wagers in either direction as they sought clarity on the
fallout from the recent collapse of two U.S. lenders and the
rescue of Credit Suisse  CSGN.S .
    "Feels like a market that is tired with overnight ranges
very narrow and volumes very light," said Brad Bechtel, global
head of FX at Jefferies.
    "The calendar is a bit lighter this week than it has been in
a while and there were no emergencies over the weekend to keep
everyone busy and so we open in a state of anxious calm,"
Bechtel said.
    Global banking stocks, which have been battered this month 
following the sudden collapse of Silicon Valley Bank and
Signature Bank, received some respite on Monday after the
Federal Deposit Insurance Corporation said First Citizens
BancShares Inc  FCNCA.O  would acquire all of Silicon Valley
Bank's  SIVB.O  deposits and loans from the regulator.   
    This helped ease some fears of contagion in Europe with an
index of European banking shares up  .SX7P  up 1.48%, led by
Deutsche Bank  DBKGn.DE  which jumped 6.31% after an 8.5% slide
on Friday. The S&P 500 Banks Index  .SPXBK  was up 2.39%.
    Easing worries helped the dollar rise 0.59% to 131.51 yen,
reversing some of its recent losses against the Japanese
currency. Risk-averse investors had sent the yen  JPY=EBS  to a
seven-week high of 129.65 per dollar on Friday and the currency
was on track to clock a 3.5% gain in March. 
    The dollar index  =USD , which measures the currency against
six rivals, was about flat on the day at 102.97, not far from
the near 7-week low of 101.91 touched on Thursday.
    The euro was 0.19% higher at $1.07825, after data on Monday
showed German business morale unexpectedly improved in March
despite the banking sector turmoil. 
    "The USD is narrowly mixed and may continue to range trade
in the short run," Shaun Osborne, chief currency strategist at
Scotiabank, said in a note.
    The U.S. Federal Reserve on Wednesday raised interest rates
by 25 basis points, as expected, but took a cautious stance on
the outlook because of the banking sector turmoil. However,
Chair Jerome Powell kept the door open for further rate rises if
necessary.
     Markets are pricing in around a 55% chance of the Fed
standing pat on interest rates in its next meeting in May and
anticipate a rate cut as early as July.    
    Sterling edged higher on Monday, with investors' appetite
for risky assets returning as they awaited a speech from Bank of
England (BoE) governor Andrew Bailey later in the day. The
British bound was up 0.39% at $1.2276.
    In cryptocurrencies, bitcoin  BTC=  last rose 0.25% to
$27,697, edging closer to the 9-month high of $28,917.46 hit
last week.

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 (Reporting by Saqib Aiqbal Ahmed; Additional reporting by Ankur
Banerjee in Singapore and Samuel Indyk in London, Editing by
Gerry Doyle, Ed Osmond, Sharon Singleton and Ken Ferris)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 332 219
1971; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))