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The US dollar (USD) has reportedly strengthened since Thursday as concerns over the banking sector have eased, helping to boost risk sentiment, with investors turning their attention to the Fed's battle against high inflation.
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The dollar index (DXY), which measures the dollar against a basket of currencies, rose about 0.097% to 102.73 after rising as much as 0.19% overnight. However, the index is on track to lose about 2% in March amid volatile markets caused by troubles in the banking sector. Christopher Wong, a currency strategist at OCBC Singapore, said that the broad risk-on sentiment is likely to continue as contagious concerns about the banking sector continue to fade and a rally in Chinese equities attracts attention. Wong added that the risk-on sentiment is still a bit more bearish this week, and they expect month-end flows along with risk flows to drive two-way trading. Banking stocks have been on a tear in recent weeks after two US lenders fell sharply and Credit Suisse dived, with the dollar weighed down by concerns that the Fed may have to back down on curbing inflation and stopping interest rates from rising. However, with no signs of further financial sector breakdowns and the steps taken by regulators, investor jitters appear to be easing for now. Focus has now shifted to what the Fed is likely to do at its next meeting in May. Markets are pricing in a 60% chance of the Fed standing still on rates, according to the FedWatch tool. With recession fears fading, market focus is now shifting to the US PCE data due later this week, which is the Fed’s preferred inflation gauge, Tina Teng said. She also said caution is still needed as the Fed may not be as market-friendly as previously thought if inflation does not open up.
EUR/USD is reportedly down about 0.13% to $1.0829, but is still on track to end the month with a gain of up to 2%. Meanwhile, the pound sterling (GBP/USD) was last at $1.2297, down about 0.11% after earlier dropping 0.2%. The Japanese yen (USD/JPY) on the other hand actually strengthened by 0.05% to 132.77 per dollar. The yen had previously plunged as much as 1.5% overnight. The currency is volatile ahead of the end of Japan's fiscal year on Friday. The Aussie dollar (AUD/USD) fell about 0.21% today to $0.667, while the kiwi (NZD/USD) also experienced the same thing as the Aussie, dropping 0.22% to $0.621.
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