US dollar slips as banking sector fears ebb

THE US dollar fell against a basket of currencies for a second straight day on Tuesday (Mar 28) as easing worries about a banking crisis revived investors’ appetite for riskier currencies.

Investors took solace from First Citizens BancShares’ agreement to buy all of failed lender Silicon Valley Bank (SVB)’s deposits and loans, and the fact that no further cracks have emerged in global banking in recent sessions.

The US dollar index, which measures the currency against six rivals, was 0.18 per cent lower on the day at 102.57, inching closer to the near seven-week low of 101.91 touched on Thursday.

The Australian dollar, seen as a liquid proxy for risk appetite, was 0.39 per cent higher at US$0.6677, getting a lift from better-than-expected retail sales data.

“There’s definitely a positive bias to trade today,” said TraderX strategist Michael Brown in London.

“I think it’s a case of ‘no news is good news’ on the banking breakdown front, which is helping to steady a few nerves,” Brown said.

The euro climbed to a five-day high against the greenback as eurozone government bond yields rose on Tuesday.

The US dollar found little support from data on Tuesday that showed the American trade deficit in goods widened modestly in February as exports declined, potentially setting up trade to be a drag on economic growth in the first quarter.

The yen rallied despite traditionally also being a safe haven, with analysts pointing to a pickup in flows ahead of the end of Japan’s fiscal year on Friday.

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US dollar steady, yen falls as banking fears ease

The US dollar fell as low as 130.415 yen, and was last off 0.54 per cent as the Japanese currency rose. That undid most of the US dollar’s 0.64 per cent jump against the yen in the previous session, which tracked a large rise in US government bond yields.

Analysts said Japanese companies were likely to be selling foreign bonds to bolster their balance sheets.

“The time of the year – the Japanese fiscal end – I think there are some flows from Japanese repatriating,” said Bart Wakabayashi, branch manager at State Street in Tokyo.

“If that’s it, it’s pretty much a one-off, and then we’ll get back to basics, which is essentially following yields.”

TraderX’s Brown warned that the US dollar’s recent sell-off may have been overdone – the greenback has slipped more than 3 per cent from its March highs against a basket of currencies.

“The market appears to have moved too far, too fast in its dovish repricing of the FOMC (Federal Open Market Committee) outlook, particularly when policymakers are adamant that (interest rate) cuts won’t occur this year,” Brown said.

Last week, the FOMC raised interest rates by 25 basis points, as expected, but took a cautious stance on the outlook because of the banking sector turmoil. However, Fed chair Jerome Powell kept the door open for further rate rises if necessary.

Sterling was up 0.17 per cent on the day, hovering around a two-month high as the Bank of England said Britain was not experiencing stress linked to the demise of SVB and Credit Suisse.

In cryptocurrencies, Bitcoin fell 0.86 per cent to US$26,908 after a 3 per cent slide the previous day, amid problems at the world’s biggest cryptocurrency exchange, Binance.

The company and its founder have been sued by the US Commodity Futures Trading Commission. The exchange also suffered a technical glitch on Monday that forced it to temporarily suspend some operations. REUTERS