Forex: Dollar steady, yen falls as banking fears ease

First Citizens Bancshares (Tennessee)

27/03/2023 12:29

By Ankur Banerjee and Samuel Indyk
       SINGAPORE/LONDON, March 27 (Reuters) - The dollar was
steady on Monday, while the yen slipped from 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 0.1% at 103.09, having gained 0.5% on Friday
amid worries in the European banking sector. 
    Global banking stocks have been battered this month 
following the sudden collapse of two U.S. lenders and the rescue
of Credit Suisse  CSGN.S , with authorities stepping in to ease
investor 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.  
    This helped ease some fears of contagion in Europe with an
index of European banking shares up  .SX7P  up 1.5%, led by
Deutsche Bank  DBKGn.DE  which jumped 4.3% after an 8.5% slide
on Friday. 
    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 near 4% gain in March. It was last down
around 0.6% at 131.50 per dollar.  
    "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 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, Fed
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.
    Meanwhile, markets are still pricing in over 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. 
    Data on Monday showed German business morale unexpectedly
improved in March despite the banking sector turmoil. 
    The euro  EUR=EBS  was up 0.1% to $1.0772, after falling
0.6% on Friday, with key inflation data due at the end of the
week. 
    Sterling  GBP=  was at $1.2270, up 0.3% on the day, having
slid 0.5% on Friday.  
    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 Australian dollar  AUD=D3  was little changed at $0.6643
and the New Zealand dollar NZD=D3> fell 0.3% at $0.6183.
    In cryptocurrencies, bitcoin  BTC=  last fell 0.2% to
$27,945. Ether  ETH=   ETH=BTSP  was down 0.5% to $1,767.

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