Singapore, March 21 (BNA) The dollar regained some of its gains on Tuesday but stalled near a five-week low as traders returned to riskier assets after the state-backed takeover of Credit Suisse by state-backed bank UBS eased some concerns. from widespread spread. banking crisis.
Market sentiment remained fragile, however, as investors struggled to quantify the fallout from a sectoral hit that began with the collapse of a Silicon Valley bank, which dampened risk appetite and provided some support for the safe-haven dollar, Reuters reported.
The British pound rose 0.02% to $1.2280, while the euro settled at $1.0722. The Australian dollar fell 0.22% to $0.6703.
News of Sunday’s planned takeover of rival Credit Suisse by UBS – a machine gun merger engineered by Swiss authorities – gave way to a small risk rally on Monday, as concerns about market-shaking turmoil at global banks faded.
“Markets remain tense, but the speed of policymakers’ response to evolving banking sector risks is encouraging,” said Alvin Tan, head of Asia currency strategy at RBC Capital Markets.
In another display of the authorities’ determination to stem the spread of contagion and ease market fears, the Federal Reserve, in coordination with central banks elsewhere, announced on Sunday that it would introduce daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the eurozone would have the dollars needed to operate.
“There was very modest demand for US dollars in the Fed’s swap lines, so that’s a positive sign in itself,” said Carol Kong, currency analyst at the Commonwealth Bank of Australia (CBA).
“But there are still some signs of stress in the financing markets… so currencies will remain very cautious,” she added. The dollar fell 0.12% to 131.15 against the Japanese yen, while the US dollar index, which measures the US currency against a basket of currencies, fell 0.04% to 103.30.
Lower US interest rate expectations also added downward pressure on the dollar ahead of the Federal Reserve’s two-day monetary policy meeting that begins later on Tuesday.
According to the CME FedWatch tool, markets are pricing in a 26.2% chance that the Fed will be quiet when it announces its monetary policy decision on Wednesday, with a 73.8% chance of a 25bp rate hike.
“Given all the market turmoil and concerns about the global financial system, I think it will be important for Fed Chairman (Jerome) Powell to reassure market participants that the US financial system is, at the very least, very resilient and robust,” Kong said.
Elsewhere, the kiwi fell 0.16% to $0.6237. The Reserve Bank of New Zealand said on Tuesday that it saw no immediate need to request the reinstatement of the US dollar swap line, which expired in 2021.
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