The dollar fell on Friday around the world as new declines in shares of Credit Suisse and First Republic Bank rocked markets worried about contagion and the likelihood of a recession due to the impact of tighter monetary policy.
The early recovery in European stocks lost steam as investor confidence was fragile, after a turbulent week following the failure of Silicon Valley Bank on March 10.
US banks have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent dayswhile the $54 billion loan to Credit Suisse and the $30 billion lifeline to First Republic failed to stem its share slide.
Credit Suisse’s stock fell 8% in Europe and First Republic’s plunged 30%.
The dollar index, which measures it against six other currencies, fell 0.604%as traders were looking forward to the Fed’s two-day policy meeting that is expected to end with a quarter percentage point hike in interest rates on March 22.
Fed funds futures contracts show a 61.3% probability that the Fed will raise rates by 25 basis points, according to CME’s FedWatch. They also show the Fed will have cut rates by July in a sign that recession fears are mounting as the central bank tightens monetary policy to combat high inflation.
Banking problems revived memories of the 2008 financial crisis, when dozens of institutions failed or were bailed out with billions of dollars from the government and the central bank.
The euro, meanwhile, rose 0.66% to $1.0675. Sterling gained 0.7% to $1.2192, while the dollar fell 0.39% against the Swiss franc.
He and inwhich tends to benefit during times of extreme volatility or market stress, se strengthened 1.48% to 131.77 units per dollar.
Source: Ambito
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