The U.S. dollar retreated in early European trade Thursday and the euro pushed higher as Credit Suisse’s move to bolster its financial position boosted risk sentiment.

At 03:55 ET (07:55 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.3% lower at 103.980, handing back some of the previous session’s 1% gain.

Credit Suisse (SIX:) announced late Wednesday to borrow as much as CHF 50 billion ($1 = CHF 0.9297) from the Swiss National Bank, strengthening its liquidity position.

Worries have been growing about the Swiss lender’s financial health for some time as it struggled with hefty customer outflows in the wake of a string of scandals. These came to head on Wednesday with its share price slumping to a record low as its main investor, Saudi National Bank, said it was unable to provide more funding to the lender.

The news of this credit line has boosted sentiment, soothing some concerns over an immediate collapse in the sector that had been hit hard by the three recent U.S. bank failures.

rose 0.4% to 1.0619, bouncing on the news, ahead of the European Central Bank’s latest policy-setting later in the session.

The ECB had previously signaled the likelihood of another interest rate increase of 50 basis points as underlying Eurozone remained elevated, but concerns about potential repercussions to the banking sector from such a hefty hike could prompt the policy makers to act more cautiously.

“The market will … take its cue from the European Central Bank today. Pushing on with a 50bp rate hike will prove difficult and we should expect more volatility immediately after the … decision,” said analysts at ING, in a note.

ECB President Christine Lagarde’s will also be of interest as she is sure to be asked how the central bank can balance efforts to deliver price stability while safeguarding financial stability.

The question is the same in the U.S., with the likely to hold back from increasing interest rates by an outsized 50 basis points next week, given the strain on the U.S. banking system.

Goldman Sachs has lifted its estimate of the odds of a U.S. recession to 35% over the next 12 months in response to increased uncertainty over the economic impact of bank stress, an increase from 25% previously.

Elsewhere, rose 0.3% to 1.2105, boosted by the improved risk sentiment. Also helping was Chancellor Jeremy Hunt’s comments in the budget on Wednesday that the economy was likely to shrink 0.2% in 2023, an improvement from the previous forecast for a 1.4% contraction.

fell 0.5% to 132.69, with the yen one of the best performers of the day. The risk-sensitive rose 0.6% to 0.665670, while edged 0.1% lower to 6.9007.

© Reuters. Dr. Jared Bernstein testifies on his nomination to be Chairman of the Council of Economic Advisers during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., April 18, 2023. REUTERS/Amanda Andrade-Rhoades

WASHINGTON (Reuters) – There was “some evidence” that China wants the dollar to weaken as the international reserve currency, said a White House nominee for a top economist position on Tuesday, and he urged Congress to raise the U.S. debt ceiling to protect the dollar’s value.

Jared Bernstein, a member of the White House Council of Economic Advisers, told a Senate Banking Committee hearing on his nomination to head the body that U.S. control of the world’s reserve currency offered a number of benefits, including the ability to impose sanctions, as Washington had done on Russia over its war against Ukraine.

Asked about an essay he published in the New York Times in 2014 entitled “Dethrone King Dollar” and whether the U.S. would be better off if it were to lose that status, Bernstein told the committee, “Definitely not.”

Bernstein, who wrote the piece while serving as a senior fellow at the Center on Budget and Policy Priorities, said the essay was intended to show both the “very solid benefit” of having the world’s reserve currency, but also the costs, including the ability of China and other countries to manage their currencies to have a trade advantage.

Asked by Republican Senator Bill Haggerty where he stood now, Bernstein said, “I share your view on the importance of the dollar as the dominant reserve currency.”

Bernstein used the exchange to underscore the administration’s concerns about the looming deadline this June for Congress to raise the debt ceiling or risk default, and Republican efforts to condition that approval on budget cuts.

He said raising the debt ceiling would help maintain the dollar’s reserve currency status and protect its value. “Having that kind of kind of default out there as a political tool is antithetical to what you and I are talking about right now.”

While Bernstein did not elaborate on China, the U.S. Treasury in November found no major U.S. trading partners manipulated its exchange rates to gain unfair advantage through June 2022, but would monitor China and six other countries.

The Treasury report criticized China for not publishing foreign exchange intervention and lack of transparency around its exchange-rate mechanism. China has previously denied intervening to weaken the yuan.

Weak tax collections in April could mean the U.S. government’s deadline to raise the $31.4 trillion debt ceiling will happen sooner than expected, analysts said on Tuesday.

The Treasury Department has warned that the federal government might no longer be able to meet its financial obligations as early as June 5, while the nonpartisan Congressional Budget Office has forecast that moment would come between July and September.

© Reuters. FILE PHOTO: U.S. Federal Reserve Governor Michelle Bowman gives her first public remarks as a Fed policymaker at an American Bankers Association conference in San Diego, California, U.S., February 11 2019. REUTERS/Ann Saphir

(Reuters) – A so-called “wholesale” central bank digital currency could hold promise for the future settlement of certain financial market transactions and processing international payments, Federal Reserve Governor Michelle Bowman said on Tuesday.

While a digital dollar could make sense for interbank transactions, there could be unintended consequences like disruptions to the banking system if the Fed were to design a central bank digital currency that would be directly available to the public, Bowman said in prepared remarks for an event at Georgetown University’s Psaros Center for Financial Markets and Policy.

The U.S. central bank has not yet said if it would embark on an effort to create a central bank digital currency, and has previously said it would seek authorization from Congress and the executive branch before doing so.