Forex: Dollar steady as banking worries keep investors on edge

First Citizens Bancshares (Tennessee)

27/03/2023 09:52

By Ankur Banerjee and Samuel Indyk
       SINGAPORE/LONDON, March 27 (Reuters) - The dollar was
steady on Monday, while the yen hovered near its seven-week peak
as investors assessed moves made by authorities and regulators
to rein in worries over the global banking system. 
    The dollar index  =USD , which measures the currency against
six rivals, rose 0.06% at 103.05, having gained 0.5% on Friday
amid banking jitters, with shares of Deutsche Bank  DBKGn.DE 
sliding nearly 9%. Shares in Deutsche Bank were up 4% in early
trade on Monday. 
    Global banking stocks have been battered through the month 
following the sudden collapse of two U.S. lenders and the rescue
of embattled bank Credit Suisse  CSGN.S  last week, with
authorities stepping in to ease investors nerves. 
    On Monday, 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.     
    The U.S. Financial Stability Oversight Council said on
Friday the U.S. banking system was "sound and resilient" despite
stress on some institutions. Investors, though, remain wary. 
    Risk-averse investors 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 near 4% gain in March. It was last at 131.03 on
Monday.  
    "Traders are being careful, not knowing if there will be any
new negative news from the European financial sector or from the
U.S.," said Niels Christensen, chief analyst at Nordea.  
    "They got a big scare in the last fortnight but if the
stress disappears slowly, markets will be more focused on
central bank expectations going forwards," he said.
    
    CAUTIOUS STANCE  
    The Fed on Wednesday raised interest rates by 25 basis
points, as expected, but took a cautious stance on the outlook
because of banking sector turmoil even as Fed Chair Jerome
Powell kept the door open on further rate rises if necessary.
     Markets are pricing in around a 75% chance of the Fed
standing pat on interest rates in its next meeting in May and
anticipate a rate cut as early as July, according to CME
FedWatch tool. 
    Meanwhile, markets are still pricing in around 40 basis
points worth of tightening from the European Central Bank by the
summer, and no rate cuts by the end of the year. 
    "Market pricing is more hawkish for the ECB than the Fed, so
on that front the dollar is a little bit vulnerable," Nordea's
Christensen said. 
    Minneapolis Fed president Neel Kashkari said on Sunday the
recent stress in the banking sector and the possibility of a
follow-on credit crunch had brought the U.S. closer to
recession. 
    "What's unclear for us is how much of these banking stresses
are leading to a widespread credit crunch. That credit crunch
... would then slow down the economy," Kashkari said in comments
to CBS show Face the Nation. "This is something we are
monitoring very, very closely."    
    The euro  EUR=EBS  was up 0.08% to $1.0771, after falling
0.6% on Friday, with key inflation data due at the end of the
week. 
    Sterling  GBP=  was at $1.2260, up 0.25% on the day, having
slid 0.5% on Friday.  
    The Australian dollar rose 0.14% to $0.6652. The kiwi was up
0.02% at $0.6202.
    In cryptocurrencies, bitcoin  BTC=  last fell 0.64% to
$27,826. Ether  ETH=   ETH=BTSP  was down 1.26% to $1,753. 

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 (Reporting by Ankur Banerjee in Singapore, Editing by Gerry
Doyle and Ed Osmond)
 ((Samuel.Indyk@thomsonreuters.com))