The U.S. dollar weakened on Friday, as losses in Credit Suisse and First Republic renewed fears in markets as investors fretted about unexploded bank bombs and a possible recession from aggressive interest rate hikes .
In late New York trading, ICE tracks the dollar against six major currencies dollar index (DXY) slipped 0.604 percent to 103.81.
Investors are waiting for the Federal Reserve (Fed) decision-making meeting next week. The market is currently betting on a 1-point rate hike (25 basis points), rather than a 2-point rate hike that was once predicted before the collapse of Silicon Valley Bank (SVB) last week.
Federal funds rate futures contracts show a 61.3 percent chance the Fed will raise rates by a tick next week, according to CME’s FedWatch tool. Futures also indicated the Fed would cut interest rates by July, reflecting heightened recession fears.
The policy-sensitive 2-year Treasury yield fell below 4% on Friday, falling to 3.90% from 4.13% on Thursday.
European stocks rebounded in early trading on Friday, but the follow-up was weak. Since Silicon Valley Bank was taken over on March 10, there have been waves of turmoil in banking stocks. Signature Bank of New York collapsed. SNB borrows up to 50 billionswiss franc。
Meanwhile, US regional banks have recently sought emergency liquidity from the Federal Reserve’s (Fed) discount window, reaching an unprecedented record high of US$153 billion. First Republic, whose shares have tumbled this week, received a $30 billion injection from the big four banks, but the rebound was short-lived.
Credit Suisse fell 8 percent in Europe on Friday, while First Republic plunged 30 percent.
“It’s likely to increase the probability of a recession, or even a hard landing, which is a more severe recession scenario,” said Mazen Issa, senior foreign exchange strategist at TD Securities. “Once a regional bank fails, people will suspect other regional banks. Is there a problem too?”
The banking turmoil is reminiscent of the 2008 financial crisis, when dozens of financial institutions collapsed or were bailed out by central banks and governments.
Three small and medium-sized U.S. banks, including First Republic Bank, were rescued by authorities or other large banks. Credit Suisse became the first large multinational bank to receive emergency rescue funds since the financial tsunami.
“Everyone is waiting to see what will happen to the U.S. economy. Now we’re not debating whether it’s going to be a soft landing or not, but whether it’s going to be a mild or severe recession?” said Edward Moya, senior market analyst at OANDA.
EURIt was up 0.66% against the greenback at $1.0675 on Friday.GBPIt climbed 0.70% to $1.2192 against the dollar.
US dollar againstswiss francDepreciated by 0.39%.The Swiss franc plummeted earlier this week, its worst day in 2015, when the Swiss National Bank abruptlyEURexchange rate ceiling.
JPYAgainst the dollar rose 1.48% to 131.77 JPYbecoming a safe-haven asset in a violent market turmoil.
Officials from Japan’s finance ministry, financial services and the Bank of Japan met late Friday to discuss stress in financial markets. Masato Kanda, vice-minister of international affairs at Japan’s finance ministry, said after the meeting that the government, central bank and bank regulators will work together to ensure the stability of the financial system.
As of Saturday (18th) around 6:00 Taiwan time Price:
- dollar indexCall 103.8753. -0.53%
- EURExchange rate against US dollar (EUR/USD) 1 EURConvert to $1.0664. +0.48%
- GBPExchange rate against USD (GBP/USD) 1 GBPConvert to $1.2175. +0.53%
- Australian dollarExchange rate against U.S. dollar (AUD/USD) 1 Australian dollarExchange for $0.6695. +0.63%
- US dollar againstCanadian Dollars (USD/CAD) Exchange rate quoted 1 US dollar to 1.3727 Canadian Dollars。+0.05%
- US dollar againstJPY (USD/JPY) The exchange rate quoted is 1 US dollar to 131.80 JPY。-1.33%
