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Dollar firms after U.S. labor data suggests more rate hikes



Dollar firms after U.S. labor data suggests more rate hikes
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Herbert Lash and Joice Alves

NEW YORK/LONDON (Reuters) – The dollar strengthened on Thursday after unemployment claims pointed to a still strong U.S. jobs market and other data showed growing labor costs, indicating the Federal Reserve has further to go in raising interest rates to tame inflation.

The yield on two-year Treasury notes, which are sensitive to interest rate expectations, shot to levels last seen in July 2007 as the market perceives the Fed will raise rates further to curb rising consumer prices.

“This move higher that you’re seeing in U.S. rates is not happening in isolation,” said Alvise Marino, macro trading strategist at Credit Suisse in New York.

“Similar developments are happening in the rest of the world, in particular in Europe, mostly notably, where the inflation data keeps on surprising relatively strong,” he said.

Atlanta Fed President Raphael Bostic said on Thursday that the U.S. central bank was ready to keep lifting rates higher if inflation doesn’t slow and was still mulling how recent, stronger-than-anticipated inflation data might shape Fed policy.

The impact of higher rates on the economy may only begin to “bite” in earnest this spring, an argument for the Fed to stick with “steady” quarter-point rate increases, Bostic said.

“There’s more and more of a concern that incoming data is revealing that the Fed might be a little bit behind the curve than maybe they expected heading into this year,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets in Toronto.

Futures edged higher, with the market pricing a peak rate climbing to 5.493% in the fed funds by September, before easing a bit later in the session to 5.447%.

The number of Americans filing new claims for unemployment fell again last week, pointing to a still strong jobs market. Another Labor Department report showed labor costs grew much faster than previously estimated in the fourth quarter.

Graphic: US jobs

The euro slid on data that showed inflation in the euro zone was not as high as investors had feared but remains elevated. Inflation eased to 8.5% from 8.6% in January on lower energy prices.

The , a basket of major trading currencies, rose 0.623%, while the euro fell 0.71% to $1.0589.

The market’s reaction to the euro zone data was muted at first following the euro’s 0.9% rise against the dollar on Wednesday, its biggest daily gain in a month, after data showed prices in Germany rose more than hoped last month.

Investors now see the ECB’s 2.5% deposit rate rising by a combined 100 basis points in March and May, then to around 4.1% at the turn of the year. Markets have priced in an extra 50 basis points of hikes in just the past month.

Policymakers were split in February on the type of signal they should send about the ECB’s next rate move, accounts of the central bank’s meeting on Feb. 2 showed on Thursday.

Sterling was held back by remarks from Bank of England Governor Andrew Bailey, who said “nothing is decided” on future rate increases, which led traders to trim bets on higher rates. Sterling traded at $1.194, down 0.76% on the day.

The Japanese yen weakened 0.44%, while the Australian and New Zealand dollars moved lower after strong gains on Wednesday driven by Chinese manufacturing data.

The offshore rose 0.70% to $6.9265 per dollar.

Investors are looking ahead to China’s National People’s Congress meeting, which begins on Sunday, for guidance on policy support for the post-COVID recovery.

fell 0.81% to $23,442.00 after shares of Silvergate Capital (NYSE:) Corp fell more than half when the crypto-focused bank delayed its annual report and said it had sold additional debt securities.

Currency bid prices at 3:24 p.m. (2024 GMT)

Description RIC Last U.S. Pct Change YTD Pct High Bid Low Bid

Clos Change






Dollar index 104.9700 104. +0.58% 1.430% +105.1800 +104.3300


Euro/Dollar $1.0597 $1.0 -0.68% -1.10% +$1.0672 +$1.0577


Dollar/Yen 136.7450 136. +0.38% +4.29% +137.0900 +136.0300


Euro/Yen 144.90 145. -0.27% +3.28% +145.5600 +144.7800


Dollar/Swiss 0.9415 0.93 +0.21% +1.84% +0.9439 +0.9395


Sterling/Dollar $1.1945 $1.2 -0.67% -1.23% +$1.2035 +$1.1924


Dollar/Canadian 1.3599 1.35 +0.05% +0.37% +1.3641 +1.3586


Aussie/Dollar $0.6731 $0.6 -0.41% -1.25% +$0.6766 +$0.6707


Euro/Swiss 0.9978 1.00 -0.44% +0.84% +1.0041 +0.9975


Euro/Sterling 0.8871 0.88 +0.08% +0.31% +0.8891 +0.8857


NZ $0.6220 $0.6 -0.57% -2.02% +$0.6257 +$0.6199

Dollar/Dollar 257

Dollar/Norway 10.4400 10.4 +0.32% +6.39% +10.4930 +10.3900


Euro/Norway 11.0618 11.0 +0.01% +5.41% +11.1216 +11.0599


Dollar/Sweden 10.5083 10.4 +0.13% +0.97% +10.5345 +10.4310


Euro/Sweden 11.1365 11.1 +0.13% -0.12% +11.1641 +11.1257


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Forex News

Dollar slips as banking turmoil snares markets




Dollar slips as banking turmoil snares markets

NEW YORK/LONDON (Reuters) -The dollar fell on Friday as further declines in the shares of Credit Suisse and First Republic Bank (NYSE:) rattled markets fearful of contagion and increased concerns that a recession lies ahead because of the impact of tighter monetary policy.

An early recovery in European stocks ran out of steam as investor sentiment remained fragile after a week of turbulence following the failure of Silicon Valley Bank on March 10.

U.S. banks have sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days, while the $54 billion loan for Credit Suisse and $30 billion lifeline for First Republic failed to halt their stock declines. Credit Suisse fell 8% in Europe and First Republic tumbled 30%.

The , a measure of the dollar against six other currencies, slid 0.604% as traders waited for the Fed’s two-day policy meeting that is expected to end with a one-quarter percentage point hike in interest rates on March 22.

Contracts for fed funds futures show a 61.3% probability that the Fed will raise rates by 25 basis points, according to CME’s FedWatch Tool. Futures also show the Fed will have cut rates by July in a sign recession fears are mounting as the U.S. central bank tightens monetary policy to fight high inflation.

Whether the banking turmoil of the past week leads to an immediate recession is hard to say, said Mazen Issa, senior FX strategist at TD Securities in New York.

“It probably increases the probability that you do have a recession and perhaps it increases the probability that you may have a hard-landing scenario, a more severe recession dynamic,” he said.

“Once you have one regional bank go down, households question whether or not the regional banks are in trouble, that’s a natural human emotion to feel,” he said.

Banking troubles revived memories of the 2008 financial crisis, when dozens of institutions failed or were bailed out with billions of dollars of government and central bank money.

Three smaller U.S. lenders, including First Republic, have had regulators and other banks step in to prop them up, while in Europe, Credit Suisse became the first major global bank since the financial crisis to get an emergency lifeline.

“There is a wait and see approach as to what will happen with the U.S. economy,” said Ed Moya, senior market analyst at OANDA in New York. “Now we’re not debating a‘soft landing, no landing.’ We’re debating is it a mild or severe recession?”

The euro rose 0.66% to $1.0675.

The rescue of First Republic on Thursday initially boosted risk appetite on Friday as concerns about global banks eased, making way for surges in the Australian and New Zealand dollars.

Sterling last traded at $1.2192, up 0.70%, while the dollar fell 0.39% against the Swiss franc. Earlier this week, the franc plunged the most against the dollar in one day since 2015, when the Swiss central bank loosened its currency peg.

The Japanese yen, which tends to benefit in times of extreme market volatility or stress, strengthened 1.48% versus the greenback to 131.77 per dollar.

Japan’s Ministry of Finance, Financial Services Agency and Bank of Japan officials met on Friday evening to discuss financial markets.

Masato Kanda, vice finance minister for international affairs, told reporters after the trilateral meeting that the government, the central bank and the banking watchdog would coordinate to ensure the stability of the financial system.

The Australian dollar, which often outperforms when investors are feeling optimistic, rose 0.81% to $0.671.

Currency bid prices at 3:09 p.m. (1909 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct Change High Bid Low Bid



Dollar index 103.7400 104.3900 -0.60% 0.242% +104.4400 +103.6800

Euro/Dollar $1.0677 $1.0611 +0.62% -0.36% +$1.0686 +$1.0611

Dollar/Yen 131.7650 133.7800 -1.49% +0.51% +133.7350 +131.5550

Euro/Yen 140.68 141.91 -0.87% +0.27% +142.2000 +140.1700

Dollar/Swiss 0.9255 0.9293 -0.38% +0.12% +0.9299 +0.9241

Sterling/Dollar $1.2194 $1.2110 +0.69% +0.82% +$1.2200 +$1.2103

Dollar/Canadian 1.3721 1.3722 +0.00% +1.28% +1.3773 +1.3679

Aussie/Dollar $0.6708 $0.6658 +0.79% -1.56% +$0.6724 +$0.6650

Euro/Swiss 0.9883 0.9859 +0.24% -0.12% +0.9911 +0.9841

Euro/Sterling 0.8754 0.8760 -0.07% -1.02% +0.8782 +0.8745

NZ Dollar/Dollar $0.6271 $0.6196 +1.20% -1.24% +$0.6277 +$0.6192

Dollar/Norway 10.6960 10.7700 -0.68% +9.00% +10.7660 +10.6700

Euro/Norway 11.4219 11.4211 +0.01% +8.84% +11.4412 +11.3507

Dollar/Sweden 10.4853 10.5049 +0.29% +0.74% +10.5515 +10.4430

Euro/Sweden 11.1910 11.1582 +0.29% +0.42% +11.2054 +11.1239

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Dollar retreats as banking support prompts relief rally




Dollar retreats as banking support prompts relief rally
The U.S. dollar slipped lower in early European trade Friday and riskier currencies rallied on easing concerns about a global banking crisis.

At 04:25 ET (08:25 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.4% lower at 103.715.

The foreign exchange market has seen a relief rally after a number of large U.S. banks injected $30 billion in deposits into First Republic Bank (NYSE:), supporting this regional bank which had been caught up in the backwash of the collapse of two other smaller U.S. banks over the past week.

The move followed Credit Suisse’s (SIX:) announcement earlier on Thursday that it would borrow up to $54B from the Swiss National Bank, ensuring the embattled lender had sufficient liquidity to cope with hefty withdrawals in the wake of a number of banking scandals.

rose 0.5% to 1.0659, benefiting from the decision of the to go ahead on Thursday with its previously signaled 50-basis-point rate hike amidst the banking turmoil.

This suggested the ECB policy makers remain confident in the underlying strength of the Eurozone banking sector.

At her regular press conference, President trod a fine line between acting tough on inflation and acknowledging the need for caution amid growing signs of financial stability risks.

The final data for the Eurozone is due later in the session, and is expected to show that inflation grew 0.8% on the month in February, up 8.5% on the year.

rose 0.5% to 1.2166, soared 0.8% to 0.6708, gained 0.8% to 0.6246, while fell 0.3% to 133.32.

Japan’s government is closely coordinating with the Bank of Japan and financial authorities overseas to prevent fallout from the banking difficulties of a number of Western banks, Finance Minister Shunichi Suzuki said on Friday.

U.S. economic data will center around the release of the University of Michigan’s reading for March later in the session, which will provide a clue as to how Americans are coping with the current economic difficulties.

That said, most eyes have now moved on to next week’s Federal Reserve monetary policy , with expectations rising that the U.S. central bank could slow its aggressive rate-hike campaign in a bid to ease the stress on the financial sector.

Markets are now pricing in a nearly 90% chance that the Fed will hike by a smaller 25 basis points next week.

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Asia FX rises, dollar dips amid easing bank crisis fears




Most Asian currencies rose sharply on Friday amid easing fears of a global banking crisis, while the dollar retreated as markets also bet that the Federal Reserve will soften its hawkish stance to prevent more economic pain.

was among the best performers for the day, rising nearly 0.5% as a positive outlook on the Chinese economy from Goldman Sachs also boosted sentiment. The investment bank expects China’s economy to grow 6% this year, more than government forecasts of 5%.

Economic data released this week showed that certain facets of the economy were recovering from three years of COVID lockdowns. But growth in the manufacturing sector still remained below full capacity.

The rose 0.6% and was set to add 1.4% this week, having benefited greatly from increased safe haven demand. A mild improvement in Japan’s massive also helped sentiment towards the yen, amid easing supply chain issues.

Broader Asian currencies advanced amid increased risk appetite, as fears of an imminent banking collapse were eased by several major U.S. lenders supporting First Republic Bank (NYSE:). This came after Swiss lender Credit Suisse Group AG (SIX:) scored an up to $54 billion credit facility from the Swiss National Bank to fortify liquidity levels.

The support for banks, coupled with government reassurances that the banking sector was stable, helped ease concerns over an imminent collapse in the banking system, following the failure of several U.S. banks over the past week.

The and dollar index futures retreated about 0.3% each amid bets that the Fed will taper its hawkish stance to prevent further pressure on the economy from rising interest rates.

The collapse of several U.S. banks in recent weeks was driven largely by a slump in bond prices, to which lenders such as Silicon Valley Bank were disproportionately exposed.

Markets are now pricing in a nearly 90% chance that the Fed will hike by a smaller 25 basis points next week.

Risk-heavy Southeast Asian currencies advanced on Friday, with the rising 0.6%, while the added 0.5%.

The rose 0.3% after data showed the island state’s key non-oil exports shrank slightly less than expected in February from the last year.

The rose 0.2%, also benefiting from weakness in oil markets, while the surged 0.8% after logging sharp losses over the past week.

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