Dollar outshines euro and sterling amid European bank jitters

THE euro and sterling fell sharply against a strengthening dollar on Friday (Mar 24) amid lingering nervousness over banks.

The dollar index rose 0.536 per cent at 103.140, with the euro down 0.71 per cent to US$1.0753. “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.

Risk aversion also sent sterling 0.53 per cent lower to US$1.222, 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 US$1.2341 on Thursday in volatile trading after the Bank of England raised interest rates by 25 bps to 4.25 per cent, but said a surprise resurgence in inflation would probably fade fast, stoking speculation that it had ended its run of hikes.

The FX world seemed to suggest a bout of risk aversion with safe-haven proxies, gold and yen outperforming and most other currencies softer, said Christopher Wong, currency strategist at OCBC.

Still the Japanese yen strengthened just 0.08 per cent versus the greenback at 130.73 per dollar.

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. US Treasury Secretary Janet Yellen reiterated on Thursday that she was prepared to take further action to ensure Americans’ bank deposits stayed safe.

SEE ALSO

Dollar falls for sixth day; BoE, SNB, Norges Bank raise rates

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

The markets will be closely watching the coming personal consumption expenditures price index, due Mar 31, for indications as to how it could influence the Fed’s upcoming rate decisions, said Trevisani. “If you get an as-expected or weaker number, I think that gives the Fed reason to pull back, which is what they’re doing anyway,” he said. REUTERS