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Both the US dollar and the yen, safe-haven assets, were broadly steady after rising overnight as renewed concerns about the US banking sector and the economy dampened risk sentiment.
The dollar index, which measures the currency against six major rivals, rose 0.01% to 101.80 after rising 0.5% overnight. The index was down 0.76% for the month.
Shares of First Republic Bank fell nearly 50% on Tuesday. Confidence in the banking sector has been shaken after the company reported that deposits fell by more than 100 billion in the quarter.
It faces dwindling and difficult options to turn around its business by establishing a “bad bank” or opportunities to sell assets, a source familiar with the matter told Reuters.
“USD gains are a common reaction to bad news, even if it’s bad news from the US,” said Joseph Capurzo, head of international and sustainability economics at the Commonwealth Bank. “While there are concerns about smaller US banks, we expect the USD to be higher.”
The Japanese yen was up about 0.4% on Tuesday, up 0.01% at 133.69 per dollar. The traditional safe haven rose 2.6% in March on fears of a widespread banking crisis, but fell 0.6% in April.
New economic data also weighed on sentiment. US consumer confidence fell to a nine-month low in April, data released tonight raised the risk the economy could slide into recession this year.
The US Richmond Fed manufacturing index fell to -10 in April, the fourth contraction in a row.
According to the CME FedWatch tool, the probability of a 25 basis point hike at next week’s Federal Reserve meeting is now 76%, up from 90% earlier in the week.
The Federal Reserve will release an internal review of its oversight of Silicon Valley banks on Friday, the central bank said.
The review, led by central bank deputy governor Michael Barr, follows the regional bank’s sudden bankruptcy last month. The review will include policy recommendations and confidential supervisory information that the central bank does not normally release, Barr said.
The euro rose 0.04% to $1.0976, but pulled away from a 10-month high reached earlier this month. Sterling last traded at $1.2411, up 0.02% today. The kiwi rose 0.15% to $0.615.
The Australian dollar fluctuated between losses and gains after data showed inflation fell from a 33-year high in the first quarter, while core inflation came in lower than expected. According to ING economists, the lower-than-expected inflation report should be enough to “spark thoughts that the Reserve Bank of Australia’s recent pause in rate tightening may be more than that, and confirm that 3.6% interest rates were the peak” this cycle.
Among cryptocurrencies, Bitcoin rose 1.2% to $28,315.40. Ethereum rose 0.4% to USD 1,867.70.
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