Dollar, yen boosted as US banking sector fears put safe-havens back in vogue

Singapore, April 26 (BNA): The dollar and the yen were flat on Wednesday, holding on to overnight gains as concerns about the banking sector and the US economy weighed on sentiment, while the Australian dollar weakened after easing inflation indicating less pressure to raise interest rates.

The dollar index, which measures the currency against six major rivals, rose 0.01% to 101.80 after rising 0.5% overnight.

According to Reuters, the index fell 0.76% for the month.

Shares of First Republic Bank fell nearly 50% on Tuesday after it reported a drop in deposits of more than $100 billion in the first quarter, hurt by a loss of confidence in the banking sector.

Joseph Capurso, Head of International and Sustainable Economics at the Commonwealth Bank of Australia, said a surge in the US dollar is the typical response to bad news, even if the bad news is from the US. “While concerns about small US banks remain, we expect the dollar to remain elevated.”

The Japanese yen strengthened 0.13%, to 133.53 per dollar, after rising about 0.4%.

The traditional safe haven gained 2.6% in March on fears of a broader banking crisis but lost 0.6% in April as fears receded.

New economic data also affected sentiment.

Data released overnight showed that US consumer confidence fell to a nine-month low in April, raising the risk of the economy falling into recession this year.

The US Richmond Fed manufacturing index also fell to -10 in April, the fourth straight month of contraction.

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The CME FedWatch tool showed that markets are now pricing in a 76% chance of a 25 basis point increase when the Federal Reserve meets next week, down from a 90% chance at the start of the week.

DBS strategists said data and sentiment could shift prices as the Fed is in the dark ahead of next week’s policy meeting.

They said market participants are not comfortable pricing in a full increase for the month of May since the bank’s troubles.

Analysts said in a note that we are concerned about downside risks and believe that the widely expected 25 basis point rally next week may not be entirely off the mark.

Investor interest will be strong on the slate of central bank meetings in the next few weeks with the Bank of Japan, under new governor Kazuo Ueda, holding a policy meeting later this week.

Meanwhile, the Federal Reserve said it will publish its internal review of its supervision of the Silicon Valley bank on Friday.

The review, led by Fed Vice Chairman of Oversight Michael Barr, comes on the heels of the regional bank’s abrupt failure last month.

It will include policy recommendations and classified supervisory information that the Fed does not normally disclose to the public, Barr said.

The euro rose 0.02% to $1.0974, but moved away from the 10-month high it touched this month.

The pound sterling was at $1.2413, up 0.04%.

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The kiwi fell 0.07% to $0.613.

The Australian dollar fell to a six-week low of $0.6604 before settling down 0.3% at $0.6605.

ING economists said a cooler-than-expected inflation report would be enough “to encourage thoughts that the recent pause in rate tightening by the RBA may end up causing more than that,” and they maintain that 3.6% was

Peak rates for this cycle.”

Investors responded to the data by prolonging the odds that the Reserve Bank of Australia will resume raising interest rates at its meeting on May 2, after pausing it in April after a series of 10 consecutive increases.


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