U.S Dollar and Japanese Yen Steady as U.S. Banking and Economic Concerns Hit Sentiment, Aussie Slides
Zatrun Published at April 26, 2023

The U.S. dollar and Japanese yen held onto overnight gains, with the dollar index nudging 0.01% higher to 101.80 after a 0.5% increase overnight. This came amid concerns over the U.S. banking sector and economy that hit sentiment. The Australian dollar slid after easing inflation suggested less pressure to raise interest rates. Shares of First Republic Bank plummeted nearly 50% after reporting a more than $100 billion plunge in deposits in the quarter, as lost confidence in the banking sector battered the bank. If the news caught your attention, continue reading the content below.

U.S Dollar and Japanese Yen Steady

Comparing the U.S. Dollar and Japanese Yen: A Look at Two of the World’s Most Widely Traded Currencies

The U.S. dollar and Japanese yen are two of the most widely traded currencies in the world, and are often compared due to their status as safe haven currencies. The U.S. dollar is the world’s primary reserve currency and is widely used in international trade and finance. It is influenced by a range of factors, including economic data, monetary policy decisions, and geopolitical events.

The Japanese yen, on the other hand, is heavily influenced by Japan’s economic performance and monetary policy decisions. It is also seen as a safe haven currency, with investors flocking to it during times of uncertainty. In terms of exchange rates, the USD/JPY pair is one of the most actively traded in the forex market, with fluctuations in the pair often reflecting changes in global risk sentiment. Overall, both the U.S. dollar and Japanese yen are important currencies in the global financial system, with their movements closely watched by traders and investors around the world.

U.S. Consumer Confidence Drops to Nine-Month Low, Adding to Recession Concerns

Fresh economic data showed that U.S. consumer confidence dropped to a nine-month low in April, heightening the risk that the economy could fall into recession this year. The U.S. Richmond Fed manufacturing index also slid, down to -10 in April, the fourth straight month of contraction. Markets are now pricing in a 76% chance of a 25 basis point increase when the Federal Reserve meets next week, down from a 90% chance at the start of the week.

DBS strategists warned that data and sentiment could shift pricing as the Fed is in a blackout ahead of its policy meeting next week. They said that the market participants are not comfortable pricing in a full increase for May since the bank problems. Investor attention will firmly be on the slate of central bank meetings in the next few weeks, with the Bank of Japan holding its policy meeting later this week under the new Governor Kazuo Ueda.

Silicon Valley Bank Review to be Published on Friday

Meanwhile, the Federal Reserve said it will publish its internal review of its supervision of Silicon Valley Bank on Friday. The review, which is being led by Fed Vice Chairman for Supervision Michael Barr, follows the regional bank’s abrupt failure last month. It will include policy recommendations and confidential supervisory information that the Fed typically does not disclose to the public, Barr has said.

The euro was up 0.02% to $1.0974, while sterling was at $1.2413, up 0.04% on the day. The kiwi eased 0.07% to $0.613. The Australian dollar slid to a six-week low of $0.6604 before settling down 0.3% at $0.6605 after data showed inflation eased from 33-year highs in the first quarter, while core inflation dipped below forecasts.

ING economists said a cooler-than-estimated inflation report should be enough to “encourage thoughts that the recent pause in rate tightening by the Reserve Bank of Australia (RBA) may end up being more than that, and confirm that 3.6% was the peak in rates this cycle.” Investors reacted to the data by lengthening the odds on the RBA resuming raising rates at its May 2 meeting, having paused in April after a streak of 10 straight increases.

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