By Ankur Banerjee
SINGAPORE (Reuters) – Safe-haven assets US dollar and yen were broadly stable after surging overnight as renewed concerns over the US banking sector and economy soured risk sentiment.
The Dollar Index, which measures the currency against six major rivals, rose 0.01% to 101.80 following a 0.5% gain overnight. The index is down 0.76% for the month.
First Republic Bank shares fell nearly 50% on Tuesday after it reported deposits fell by more than $100 billion in the fourth quarter due to a loss of confidence in the banking sector.
A source familiar with the matter told Reuters that options for turning the business around, such as creating a “bad bank” or possibly selling assets, are becoming fewer and tougher.
“A rising US dollar is a classic reaction to bad news, even if bad news is rooted in the US,” said Joseph Capruso, head of international and sustainable economics at Commonwealth Bank Australia. “We expect the U.S. dollar to continue to appreciate, although concerns about smaller U.S. banks remain,” he said.
The Japanese yen rose 0.01% to 133.69 to the dollar after gaining about 0.4% on Tuesday. Traditional safe havens rose 2.6% in March amid widespread banking crisis fears, but fell 0.6% in April.
Also weighing on sentiment was the latest economic data. US consumer confidence plunged to its lowest level in nine months in April, increasing the risk that the economy will slip into recession this year, as last night’s data showed.
The US Richmond Fed’s manufacturing index also fell, reaching -10 in April, marking the fourth straight month of contraction.
The CME FedWatch tool puts the chances of a 25 basis point rate hike by the Federal Reserve next week at 76%, down from a 90% chance at the start of the week.
The Federal Reserve is scheduled to release an internal review of the supervision of Silicon Valley banks on Friday, the central bank said.
The review is led by Federal Reserve Vice Chairman Michael Barr, following last month’s sudden collapse of a local bank. This includes policy recommendations and confidential supervisory information that the Fed doesn’t normally make public, Barr said.
The euro climbed 0.04% to $1.0976, but away from the 10-month high touched earlier this month. Sterling’s final trade was $1.2411 and he was up 0.02% on the day. Kiwi rose 0.15% to $0.615.
The Australian dollar was teetering between losses and gains after data showed inflation eased from a 33-year high in the first quarter, while core inflation was below expectations. Economists at ING said lower-than-expected inflation reports “reinforced the idea that the recent moratorium on rate hikes by the Reserve Bank of Australia could be more, with 3.6% being the peak rate hike this year.” It is sufficient to confirm that the cycle. “
In cryptocurrencies, Bitcoin rose 1.2% to $28,315.40. Ethereum gained 0.4% to $1,867.70.
(Reporting by Ankur Banerjee, Singapore; Editing by Edwina Gibbs)