By Rae Wee
SINGAPORE, March 17 (Reuters) - The dollar slipped on
Friday after authorities and banks moved to ease stress on the
financial system, taking the heat off most major currencies that
tumbled this week in the wake of bank turmoil.
Action to rescue First Republic Bank in the U.S. on
Thursday boosted risk appetite globally on Friday as fears of a
global banking crisis eased, making way for surges in the
Australian and New Zealand dollars.
The antipodean currencies are traditionally shunned in times
of risk aversion.
The Aussie jumped 0.79% to $0.6710 in Asia trade on
Friday, while the kiwi rose 0.67% to $0.62375.
With oversight by authorities, large U.S. banks injected $30
billion in deposits into First Republic, which was caught up in
a widening crisis triggered by the collapse of two other
mid-size U.S. banks over the past week.
The move followed Credit Suisse's announcement
earlier on Thursday that it would borrow up to $54 billion from
the Swiss National Bank, after the central bank threw a
financial lifeline to the embattled Swiss lender.
Credit Suisse had similarly become embroiled in widespread
contagion following the implosion of U.S.-based Silicon Valley
Bank (SVB), which resulted in a 30% plunge in its shares earlier
in the week.
But even as the market rout stoked fears about the health of
Europe's banks, the European Central Bank (ECB) went ahead with
a hefty 50-basis-point rate hike at its policy meeting on
Thursday.
ECB policymakers sought to reassure investors that euro zone
banks were resilient and that if anything, the move to higher
rates should bolster their margins.
The euro's reaction to the decision was fairly
muted, though it gained more ground in Asia trade on Friday,
rising 0.32% to $1.0645.
"The euro zone banking sector remains in reasonably solid
shape," said Wells Fargo international economist Nick
Bennenbroek.
"Should market strains ease and volatility recede in the
weeks and months ahead, persistent inflation should in our view
be enough to elicit further (ECB) tightening."
Elsewhere, sterling edged 0.28% higher to $1.2144,
while the Swiss franc rose 0.3%. Earlier in the week,
the Swissie had plunged the most against the dollar in a day
since 2015.
The Japanese yen remained elevated, as traders
still looked to safety assets, still fearing that recent stress
unfolding across banks in the U.S. and Europe could be just an
early stage of a widespread systemic crisis.
It was last 0.4% higher at 133.23 per dollar, on track to
rise more than 1% for the week.
"The market gyrations of the past week are not rooted in a
banking crisis, in our view, but rather are evidence of
financial cracks resulting from the fastest interest rate hike
campaigns since the early 1980s," said analysts at BlackRock
Investment Institute.
"Markets have woken up to the damage caused by that approach
- a recession foretold - and are starting to price it in."
The Federal Reserve's monetary policy meeting next week now
moves to centre stage. Some investors are hoping that the Fed
could slow down on its aggressive rate-hike campaign in a bid to
ease the stress on the financial sector. "The turmoil in the banking sector is complicating the
outlook for Fed policy, but the impact may be more nuanced than
the Fed simply reversing course," said Philip Marey, senior U.S.
strategist at Rabobank.
The U.S. dollar index fell 0.27% to 104.11.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Rae Wee; Editing by Bradley Perrett)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.