Singapore, March 14 (BNA): The dollar fell near a multi-week low as fears of a broader systemic crisis after the collapse of a technology-focused US bank led traders to speculate that the Federal Reserve may halt the cycle of rate hikes.
Market jitters continued to set the tone for a second straight day of trading in the wake of the sudden collapse of Silicon Valley Bank (SVB) and Signature Bank, although some calm was restored after US President Joe Biden pledged action to ensure the safety of the bank. banking system.
The dollar rose to an intraday high of 134.03 yen, and was last up 0.48% at 133.87, reversing some of Monday’s decline of 1.4%, according to Reuters.
The euro was last down 0.27% at $1.0700, after peaking at $1.07485 in the previous session, while the British pound fell 0.28% to $1.2148, off Monday’s high of $1.2200.
Over the weekend, the US authorities launched emergency measures in response to the SVB collapse, in an effort to boost banking confidence.
The SVB crisis highlights the fact that when you raise interest rates too much, said Rodrigo Catrill, chief currency analyst at the National Australia Bank.
Since then, traders have cut their bets on how long the Federal Reserve will continue to raise interest rates, sending Fed funds futures skyrocketing and the US dollar falling.
Market pricing now shows a roughly 35% chance that the Fed will keep interest rates on hold at its policy meeting next week, with rate cuts expected as early as June and through the end of the year.
The interest rate hike by the Federal Reserve and its expectations of how high US interest rates will go were a big driver of the dollar’s rally.
Against a basket of currencies, the US dollar index rose 0.21% to 103.90, after falling 0.9% on Monday, and reaching a one-month low of 103.47.
The Australian dollar fell 0.23 percent to $ 0.6652, retreating from some of its 1.3 percent jump in the previous session, while the New Zealand dollar fell 0.13 percent, to stand at $ 0.6212, after it rose similarly by 1.4 percent on Monday.
A key report on US inflation is due later, which could add to the Fed’s dilemma over whether it should stay on a path of raising interest rates to tame persistent price pressures, or back away from tightening monetary policy to give the banking system some room. breathing. .
Goldman Sachs analysts said Sunday that they no longer expect the Fed to raise interest rates at its March meeting in light of the latest pressure, while Nomura predicted the central bank would cut rates and put the brakes on quantitative tightening.
NAA