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Banking crisis fears persist, keeping the Dollar stable

On Monday, the dollar remained steady while the yen was near its seven-week peak as investors analyzed the actions taken by regulators and authorities to control concerns regarding the global banking system. The dollar index, which measures the currency against six competitors, increased by 0.078% to 103.07, after it gained 0.5% on Friday due to banking concerns, with Deutsche Bank's shares plummeting nearly 9%. Over the month, global banking stocks have been battered after the sudden collapse of two US lenders and the rescue of embattled Swiss bank Credit Suisse last week, resulting in regulators stepping in to ease investors' nerves.

Marc Chandler, the chief market strategist at Bannockburn Global Forex, stated that "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." On Monday, the Federal Deposit Insurance Corporation announced that First Citizens BancShares Inc would acquire all of Silicon Valley Bank's deposits and loans from the regulator. Meanwhile, the US Financial Stability Oversight Council mentioned on Friday that the US banking system is "sound and resilient," despite the pressure on some institutions. However, investors continue to be cautious.


On Friday, risk-averse investors caused the yen to reach a seven-week high of 129.65 per dollar, and the currency was on track to record a 4% gain in March. It was last trading at 130.75 on Monday. The Federal Reserve raised interest rates by 25 basis points on Wednesday, as anticipated, but adopted a cautious stance on the outlook due to the banking sector turmoil, while Fed Chair Jerome Powell kept the door open for further rate increases if necessary.


The markets are anticipating more than an 80% probability that the Fed will keep interest rates unchanged at its next meeting in May and forecast a rate cut as early as July, according to the CME FedWatch tool. Chandler stated that "Contrary to the clear signal from Powell, the Fed funds futures are pricing in dramatic easing in the coming months. This is extremely aggressive and stretches the imagination."


Minneapolis Fed President Neel Kashkari stated on Sunday that the recent stress in the banking sector and the possibility of a follow-on credit crunch have brought the US closer to a 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 stated in comments to CBS show Face the Nation. "This is something we are monitoring very, very closely."


In other currencies, the euro was up 0.05% to $1.0764 after falling 0.6% on Friday, and sterling was at $1.2235, up 0.05% on the day, after sliding 0.5% on Friday. The Australian dollar rose 0.09% to $0.665, and the kiwi was up 0.03% at $0.620. In the cryptocurrency market, Bitcoin rose 0.84% to $27,861.02, and Ethereum rose 0.71% to $1,763.39.


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