Banking stocks plunged in Europe with heavyweights Deutsche Bank and UBS Group pummelled by worries that the worst problems to hit the sector since the 2008 financial crisis have not yet been contained. The dollar index rose 0.497% at 103.100, with the euro down 0.68% to $1.0756. "Over many, many years, whenever there's perceived or actual problems that look like they might be deep-rooted, people go to the dollar, and I think that's probably all it is right now, said Joseph Trevisani, senior analyst at FXStreet.com. Better-than-expected flash Purchasing Managers' Index (PMI) data failed to lift the single currency as sentiment in markets were fragile with European banks falling more than 3%. "The data were better than expected, but the mood in the market is risk aversion, which is supporting another move back to the safe haven dollar," said Jane Foley, Head of FX Strategy at Rabobank London.
Risk aversion also sent sterling 0.48% lower to $1.2226, despite data showing the British economy was set to grow in the first quarter and confidence was growing.
The pound touched a seven-week high of $1.2341 on Thursday in volatile trading after the Bank of England raised interest rates by 25 bps to 4.25%, but said a surprise resurgence in inflation would probably fade fast, stoking speculation it had ended its run of hikes. Banking stocks have been battered this month following the sudden failures of two regional U.S. lenders and the emergency sale of embattled Swiss bank Credit Suisse to rival UBS.
SAFE-HAVEN DEMAND The FX world seemed to suggest a bout of risk aversion with safe-haven proxies, gold and yen outperforming and most other currencies softer, according to Christopher Wong, currency strategist at OCBC.
The safe-haven yen was in demand, and strengthened 0.29% versus the greenback at 130.43.
The Fed on Wednesday raised interest rates by 25 basis points, as expected, but took a cautious stance on the outlook because of banking sector turmoil even as Fed Chair Jerome Powell kept the door open on further rate rises if necessary. U.S. Treasury Secretary Janet Yellen reiterated on Thursday that she was prepared to take further action to ensure Americans' bank deposits stayed safe, to ease investor nerves. The markets will be closely watching next week's readout of the personal consumption expenditures (PCE) price index, due March 31, for indications as to how the print could influence the Fed's upcoming rate decisions, said Trevisani.
"If you get a as expected or weaker number, I think that gives the Fed reason to pull back, which is what they're doing anyway," he said.
======================================================== Currency bid prices at 10:45AM (1445 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change
Session
Dollar index 103.1000 102.6000 +0.50% -0.377% +103.3600 +102.5000
Euro/Dollar $1.0759 $1.0832 -0.67% +0.41% +$1.0839 +$1.0714
Dollar/Yen 130.4350 130.8300 -0.29% -0.50% +130.9300 +129.6450
Euro/Yen 140.35 141.73 -0.97% +0.02% +141.8500 +139.0800
Dollar/Swiss 0.9185 0.9164 +0.23% -0.67% +0.9216 +0.9157
Sterling/Dollar $1.2228 $1.2285 -0.48% +1.10% +$1.2290 +$1.2192
Dollar/Canadian 1.3775 1.3716 +0.45% +1.69% +1.3804 +1.3710
Aussie/Dollar $0.6647 $0.6684 -0.55% -2.49% +$0.6694 +$0.6625
Euro/Swiss 0.9881 0.9925 -0.44% -0.14% +0.9940 +0.9850
Euro/Sterling 0.8796 0.8814 -0.20% -0.54% +0.8828 +0.8778
NZ $0.6206 $0.6249 -0.67% -2.24% +$0.6252 +$0.6193
Dollar/Dollar
Dollar/Norway 10.4890 10.4010 +0.94% +6.98% +10.5850 +10.3810
Euro/Norway 11.2899 11.2504 +0.35% +7.59% +11.3575 +11.2366
Dollar/Sweden 10.4208 10.3248 +0.16% +0.12% +10.4726 +10.3055
Euro/Sweden 11.2078 11.1901 +0.16% +0.57% +11.2302 +11.1758
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Hannah Lang in Washington and Joice Alves in
London; Additional reporting by Ankur Banerjee in Singapore;
editing by Angus MacSwan and Mark Heinrich)
