Dollar steady as banking crisis fears linger

By Ankur Banerjee

SINGAPORE (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, which measures the currency against six rivals, rose 0.078% at 103.07, having gained 0.5% on Friday amid banking jitters, with shares of Deutsche Bank sliding nearly 9%.

Global banking stocks have been battered through the month in the wake of the sudden collapse of two U.S. lenders and the rescue of embattled Swiss bank Credit Suisse last week, with authorities stepping in to ease investors nerves.

“Pragmatic action by central banks, governments, and the private sector has thus far been insufficient to allow investors to be confident that the problem is ring-fenced,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

On Monday, the Federal Deposit Insurance Corporation said First Citizens BancShares Inc would acquire all of Silicon Valley Bank’s 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 to a seven-week high of 129.65 per dollar on Friday and the currency was on track to clock a 4% gain in March. It was last at 130.75 on Monday.

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 a more than 80% chance of the Fed’s 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.

“Contrary to the clear signal from Powell, the Fed funds futures are pricing in dramatic easing in the coming months,” Chandler said. “This is extremely aggressive and stretches the imagination.”

Minneapolis Fed president Neel Kashkari said on Sunday the recent stress in the banking sector and the possibility of a follow-on credit crunch has 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.”

Meanwhile, the euro was up 0.05% to $1.0764, after falling 0.6% on Friday. Sterling was at $1.2235, up 0.05% on the day, having slid 0.5% on Friday.

The Australian dollar rose 0.09% to $0.665. The kiwi was up 0.03% at $0.620.

In cryptocurrencies, bitcoin last rose 0.84% to $27,861.02. Ethereum last rose 0.71% to $1,763.39.

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Currency bid prices at 0545 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.0765 $1.0762 +0.03% +0.47% +1.0780 +1.0759

Dollar/Yen 130.7800 130.7050 +0.02% -0.39% +131.0400 +130.6400

Euro/Yen 140.78 140.60 +0.13% +0.34% +141.0800 +140.5800

Dollar/Swiss 0.9184 0.9197 -0.09% -0.63% +0.9199 +0.9182

Sterling/Dollar 1.2234 1.2229 +0.12% +1.24% +1.2251 +1.2227

Dollar/Canadian 1.3732 1.3760 -0.20% +1.35% +1.3743 +1.3725

Aussie/Dollar 0.6649 0.6643 +0.11% -2.44% +0.6662 +0.6637

NZ 0.6201 0.6201 +0.02% -2.32% +0.6212 +0.6192

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Ankur Banerjee in Singapore. Editing by Gerry Doyle)