SINGAPORE/LONDON, March 13 (Reuters) - The U.S. dollar fell on Monday on expectations the Federal Reserve will be less aggressive in raising interest rates after authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank (SIVB.O).
The U.S. government announced several measures early in the Asian trading day, saying all SVB customers will have access to their deposits starting on Monday.
The authorities also said depositors of New York's Signature Bank (SBNY.O), which was closed on Sunday by the New York state financial regulator, would be made whole at no loss to the taxpayer.
The Fed announced it would make additional funding available through a new Bank Term Funding Program, which would offer loans of up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.
The market turmoil from the SVB collapse led investors to speculate the Fed will no longer raise interest rates by a super-sized 50 basis points this month. The focus will now be on Tuesday's inflation data to gauge how hawkish the Fed is likely to be.
The dollar index , which measures the U.S. currency against six others, slipped as much as 0.55% to near one-month lows of 103.67 after Goldman Sachs said it no longer expects the Fed to deliver a rate hike at its March 22 meeting. The index was last at 104.12.
The market is now pricing a nearly 60% chance of the Fed sticking to its current rate and around a 40% chance of a 25 basis point hike. In contrast, the market was pricing a 70% chance of a 50 basis point hike before the SVB collapse.
"There's been a radical change in interest rate expectations and in that scenario the dollar has weakened," said Niels Christensen, chief analyst at Nordea.
"The reason we're seeing such repricing in rate hike expectations is the collapse of the banks. If we don't see any spreading, expectations for rate hikes should be revived quickly."
Safe-haven currencies, such as the Japanese yen and Swiss franc benefited from the fallout from SVB.
The yen strengthened 1.5% to 133.03 per U.S. dollar, its highest level in nearly a month, while the U.S. currency fell 0.8% versus the franc to 0.9140.
Meanwhile, the euro was up 0.29% at $1.0670, having earlier hit a near one-month high of $1.0737, ahead of the European Central Bank's policy meeting on Thursday.
"The ECB is still expected to deliver a 50-basis point hike," Nordea's Christensen added.
"The question is how hawkish will the ECB be. We think they'll signal there will be more rate hikes to come."
Sterling was last trading at $1.2082, up 0.39% on the day.
The Australian dollar jumped 0.87% to $0.6639, and was on track for its biggest one-day percentage jump since Feb. 7. The New Zealand dollar gained 1% to trade at $0.6194.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 44 basis points at 4.1447%, on track for its biggest three-day decline since Black Monday in 1987.
Bitcoin and other cryptocurrencies rallied over the weekend, with bitcoin last at $22,114 and ether , at $1,581.
