The euro and the British pound fell sharply against a strengthening US dollar on Friday amid lingering nervousness over banks.
Banking stocks plunged in Europe with heavyweights Deutsche Bank and UBS Group AG pummeled by worries that the worst problems to hit the sector since the 2008 financial crisis have not yet been contained.
The US dollar index rose 0.536 percent to 103.140 points, with the euro down 0.71 percent to US$1.0753.
Photo: AFP
“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,” FXStreet.com analyst Joseph Trevisani said.
Risk aversion also sent the pound 0.53 percent lower to US$1.222, despite data showing that the British economy was set to grow in the first quarter of this year 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 basis points to 4.25 percent, but said a surprise resurgence in inflation would probably fade fast, stoking speculation it had ended its run of hikes.
In Taipei, the New Taiwan dollar yesterday dropped 0.1 percent against the US dollar, falling NT$0.035 to close at NT$30.388. Turnover totaled US$103 million.
The NT$ opened at the day’s high of US$30.370, and posted a low of NT$30.395 in the afternoon.
Over the past week, the NT$ gained 0.5 percent against the greenback.
Foreign exchange courses were affected by banking being battered this month following the sudden failures of two regional US lenders and the emergency sale of embattled Credit Suisse to rival UBS.
The foreign exchange world seemed to suggest a bout of risk aversion with safe-haven proxies, gold and the Japanese yen outperforming, and most other currencies softer, OCBC currency strategist Christopher Wong said.
Still the yen strengthened just 0.08 percent versus the greenback at 130.73 per US dollar.
“The more puzzling behavior in light of this is the fact that the yen is just a touch stronger — you can argue it’s pretty much unchanged,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi US. “I would have thought in this environment that you would see a stronger yen.”
The US Federal Reserve 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 Secretary of the Treasury Janet Yellen on Thursday reiterated that she was prepared to take further action to ensure US bank deposits stayed safe, to ease investor nerves.
The markets will be closely watching next week’s readout of the personal consumption expenditures price index, due on Friday, for indications as to how the print could influence the Fed’s upcoming rate decisions, Trevisani said.
“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.
Additional reporting by Staff writer, with CNA
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