SINGAPORE – The US dollar and the yen, both safe haven assets, were mostly steady after spiking higher overnight as renewed concerns over the US banking sector and economy dented risk sentiment.
The dollar index, which measures the currency against six major rivals, nudged 0.01 percent higher to 101.80 following a 0.5 percent increase overnight. The index is down 0.76 percent for the month.
Shares of First Republic Bank slid nearly 50 percent on Tuesday after it reported a more than $100 billion plunge in deposits in the quarter, battered by lost confidence in the banking sector.
It faces dwindling and tough options to turn around its business with the creation of a ‘bad bank’ or asset sales possibilities, a source familiar with the matter told Reuters.
“The USD increase is the typical response to bad news, even if the bad news is based in the United States,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia. “While concerns about small US banks remain, we expect the USD to stay elevated.”
The Japanese yen inched up 0.01 percent to 133.69 per dollar, after gaining about 0.4 percent on Tuesday. The traditional safe-haven gained 2.6 percent in March amid fears of a widespread banking crisis but has lost 0.6 percent for the month of April.
Also weighing on sentiment was fresh economic data. US consumer confidence dropped to a nine-month low in April, data overnight showed, heightening the risk that the economy could fall into recession this year.
The US Richmond Fed manufacturing index slid as well, down at -10 in April, the fourth straight month of contraction.
Markets are now pricing in a 76 percent chance of a 25 basis point hike when the Federal Reserve meets next week, CME FedWatch tool showed, down from a 90 percent chance at the start of the week – Reuters
