The dollar index eased some gains on Friday, as investors pulled back bets on further monetary tightening after the core PCE price inflation, the Federal Reserve’s preferred gauge to measure inflation, slowed more than expected to 4.6% in February, the lowest in 15 months. Earlier, several Fed policymakers suggested more monetary tightening would be needed to tame inflation, even after the recent turmoil in the banking sector. Money market bets are now pricing in an over 50% chance that the US central bank will raise rates by 25 basis points in May and pause afterward. Meanwhile, the dollar index is on track for a third consecutive weekly decline and is down more than 2% in March as the ending of the Fed's rate-tightening cycle spooked investors. The DXY lost more than 1% in this year's first quarter.

DXY Eases Some Gains, Heads for Monthly Drop

The dollar strengthened against a basket of major currencies on Friday, regaining ground above the 102 mark as investors reassessed the outlook for monetary policy. Several Fed policymakers suggested more monetary tightening would be needed to tame inflation, even after the recent turmoil in the banking sector. Money market bets are now pricing in an over 50% chance that the US central bank will raise rates by 25 basis points in May and pause afterward. Today, a report on the Fed's preferred measure of inflation will be published to provide further clues into the central bank's next move. The most pronounced buying activity was against the euro and the Australian dollar. Meanwhile, the dollar index is on track for a third consecutive weekly decline and is down more than 2% in March as the ending of the Fed's rate-tightening cycle spooked investors. The DXY lost more than 1% in this year's first quarter.

DXY Bounces Back, Heads for a Quarterly Loss

The euro held above $1.088, not far from a seven-week high of $1.0929 touched on March 22nd and heading for an over 2% gain against the USD, amid expectations the European Central Bank will keep raising interest rates in the coming months to combat inflation. The latest CPI report showed the Eurozone inflation slowed in March to an over year low of 6.9% as energy prices dropped for the first time in two years, but the core index accelerated to a fresh all-time high of 5.7%. Earlier this month, ECB President Lagarde said that the central bank was determined to get the inflation back on target and it won’t involve “trade-offs" despite the recent banking turmoil and risks of recession. Elsewhere, the US Federal Reserve is seen standing pat in May and might deliver a rate cut as soon as July.

Euro Nears 7-Week High

Sterling hovered around $1.236, not far from a near two-month high of $1.242 hit on Friday and heading for its biggest monthly gain against the USD since November, supported by central bank divergence. Bank of England Governor Andrew Bailey said earlier in March that the central bank might need to hike rates again after UK inflation unexpectedly rose to 10.4% in February and food inflation rose to a record high in March. Traders now believe BoE rates will top out at 4.5% by September. At the same time, the US Federal Reserve appeared less certain about its next monetary policy step following the recent banking sector turmoil. On the data front, the latest GDP report showed Britain's economic growth was revised slightly higher to show a 0.1% expansion in the final three months of 2022. In other economic news, a BoE report released earlier in the month showed the volume of mortgages approved by British lenders rose more than expected in February.

Sterling Hovers Around 2-Month High

The offshore yuan appreciated past 6.88 per dollar, heading back to its strongest levels in over six weeks as better-than-expected domestic economic data boosted risk sentiment. Latest data showed that China’s manufacturing activity slowed slightly in March, but came in above market forecasts and remained expansionary for the third straight month. Meanwhile, services activity accelerated the most in 12 years, boosted by strong domestic demand. On the monetary policy front, the People’s Bank of China recently announced a surprise cut to banks’ reserve requirement ratio for the first time this year to aid the economic recovery. The central bank also held its key lending rates steady at its March fixing, with the one-year loan prime rate at 3.65% and that of the five-year at 4.3%. The yuan is on track to advance for the second consecutive quarter.

Chinese Yuan Gains on Robust Economic Data

The Australian dollar traded around $0.67 and was set to end March little changed, in a period marked by constantly shifting outlooks for interest rates and the banking sector globally. Meanwhile, easing domestic inflationary pressures supported expectations that the Reserve Bank of Australia would halt its interest rate hikes at next week’s meeting. The RBA stated in its latest minutes it would reconsider the case for a pause at the April fixing to reassess the economic outlook. The country's central bank raised interest rates by 25 basis points in March, lifting the cash rate for the 10th straight meeting and bringing borrowing costs to an almost 11-year high of 3.6%.

Australian Dollar Set to End March Flat

The New Zealand dollar appreciated past $0.628, reaching toward its highest levels in six weeks, amid growing expectations that the Reserve Bank of New Zealand will lift the official cash rate by 25 bps to 5% at its meeting next week, after a 50 bps hike in February. The country's GDP growth is expected to to have shrunk 0.3% in Q1, after a 0.6% contraction in Q4 of 2022, indicating a mild recession that is likely to prompt the RBNZ to slow its torrid pace of rate hikes. The RBNZ has lifted its policy rate by a total of 450 basis points in ten consecutive meetings, bringing the cash rate to a 41-year record of 4.75%. Traders now await a key US inflation measure on Friday.

NZD Rises to 6-Week High

The dollar index held its recent decline to around 102.2 on Friday and was on track to decline for the second straight quarter, weighed down by expectations that the Federal Reserve will end its tightening campaign soon amid easing inflationary pressures and efforts to avoid a wider banking crisis. The Fed delivered a widely expected 25 basis point rate hike at its March meeting and hinted at just one more rate increase. Meanwhile, money markets are currently pricing a 40% chance that the central bank will pause its rate hikes in May, with rate cuts expected by year’s end. All eyes now turn to a critical measure of US inflation and several speeches from Fed officials on Friday.

Dollar Heads for 2nd Quarterly Decline

The South African rand appreciated past 17.8 against the USD, its highest in seven weeks after South Africa's central bank raised its main lending rate by a higher-than-expected 50 bps to 7.75% citing upside risks to the inflation outlook. The decision surprised markets that expected a smaller 25 bps increase and pushed borrowing costs to the highest since May 2009. The South African Reserve Bank has now raised rates for the ninth time in a row, adding a total of 425 bps to the repo rate since it began tightening policy in November 2021 to tame inflation. At the same time, the South African rand has been benefiting from a weaker dollar on growing expectations that the US Federal Reserve will pause interest rate hikes in May and follow with rate cuts soon after that due to the financial turmoil.

South African Rand Strengthens to 7-Week High

The dollar weakened against a basket of major currencies on Thursday, depreciating toward the 102 mark as investors reassessed the outlook for monetary policy. The financial turmoil, which started earlier in March with the collapse of two regional banks, has prompted investors to reprice expectations of future monetary tightening by the US central bank. Money markets are now pricing a pause in interest rate hikes in May, with rate cuts expected soon after that. All eyes now turn to a critical measure of US inflation and several speeches from Fed officials this week. The most pronounced selling activity was against the euro and the British pound.

DXY Under Renewed Pressure

USDCAD decreased to a 4-week low of 1.3553

Canadian Dollar Hits 4-week High

The New Zealand dollar fluctuated at around $0.621, struggling for direction as investors awaited the Reserve Bank of New Zealand's monetary policy decision next week, after delivering the tenth straight hikes. Domestically, official data showed that New Zealand's business confidence was almost unchanged at -43.4 in March, remaining at very subdued levels compared to historical averages as manufacturing and services firms remained pessimistic, amid rising cost pressures. New Zealand’s annual inflation is currently running near three-decade highs of 7.2%, well above the central bank’s medium-term target of 1%-3%. Traders now await the major US economic reports and several speeches for Fed officials this week. The RBNZ has lifted its policy rate by a total of 450 basis points, bringing the cash rate to a 41-year record of 4.75%.

NZ Dollar Struggles for Direction

The dollar strengthened against a basket of major currencies on Wednesday, bouncing back toward the 103 mark after two sessions in the red as investors reassessed the outlook for monetary policy. The Federal Reserve delivered a widely expected 25 basis point rate hike last week and hinted it was close to pausing its rate-tightening cycle amid turbulence in the banking sector. Still, Fed Chair Jerome Powell said the officials didn't see rate cuts for 2023, while investors have priced in about a 50% probability that the US central bank will raise rates by another 25 bps at its next meeting. All eyes now turn to a critical measure of US inflation and several speeches from Fed officials this week. The most pronounced buying activity was against the yen, which was volatile as the end of the Japanese fiscal year looms.

DXY Regains Some Traction

The Mexican peso was changing hands around $18, approaching a five-year peak of $17.9 hit on March 8th, amid a bullish confluence of domestic and international factors. Mexican president Andrés Manuel López Obrador's fiscal austerity, in which he slashed government spending and ran small deficits, has given investors some respite. At the same time, robust foreign investment, which hit $35.5 billion last year, the highest since 2015, made the peso the preferred emerging currency. On the policy front, the Bank of Mexico raised its benchmark interest rate by 50 bps to record 11% in February, adding to the 750 bps of increases since its tightening path began in June 2021. Analysts now expect Banxico to moderate the pace of its monetary tightening and hike the benchmark interest rate by 25 bps on Thursday.

Mexican Peso Resumes Upward Trend

The New Zealand dollar held firm at $0.6243 on Wednesday, amid growing expectations that the RBNZ will lift the official cash rate by 25bps to 5.0% at its meeting next week. At the same time, traders see a risk of a further move to 5.25% in May. New Zealand’s annual inflation is currently running near three-decade highs of 7.2%, well above the central bank’s medium-term target of 1%-3%.  Meanwhile, the RBNZ anticipates the cash rate to peak at 5.5% this year, the most aggressive policy tightening streak since the cash rate was introduced in 1999.

NZ Dollar Stays Solid

The Japanese yen fell toward 132 per dollar, pausing its recent advance as fears of a wider banking contagion abated, hurting demand for safe-haven currencies. Investors welcomed news that First Citizens BankShares agreed to buy all deposits and loans of failed Silicon Valley Bank. Federal Reserve vice chair for supervision Michael Barr also told lawmakers that SVB’s troubles were due to “terrible” risk management, suggesting it could be an isolated case. Domestically, latest data showed that Japan’s annual core inflation rate slowed sharply in February, easing pressure on the central bank to normalize monetary policy. Minutes from the Bank of Japan’s January meeting showed members reiterated the need to maintain ultra-easy policies, as it takes time to reach the 2% inflation target in a sustainable and stable manner. The BOJ left its policy of ultra-low interest rates unchanged at the March meeting, in what was Governor Haruhiko Kuroda’s final policy meeting before his retirement.

Japanese Yen Pauses Recent Advance

The Australian dollar fell below $0.67 after Australia’s monthly CPI indicator showed further easing in February, supporting expectations that the Reserve Bank of Australia would pause its interest rate hikes at next week’s meeting. The RBA stated in its latest policy meeting minutes it would reconsider the case for a pause at the April fixing to reassess the economic outlook. The Australian central bank raised interest rates by 25 basis points in March, lifting the cash rate for the 10th straight meeting and bringing borrowing costs to an almost 11-year high of 3.6%. Meanwhile, the aussie found support recently from easing concerns about the global banking sector as authorities and major lenders took efforts to shore up market confidence.

Australian Dollar Slips on Easing Inflation

The dollar index held its recent decline to around 102.5 on Wednesday after losing nearly 1% in the past two sessions, as fears over the recent financial turmoil continued to ease, prompting traders to reduce holdings in safer assets. Investors welcomed news that First Citizens BankShares agreed to buy all deposits and loans of failed Silicon Valley Bank. Federal Reserve vice chair for supervision Michael Barr also told lawmakers that SVB’s troubles were due to “terrible” risk management, suggesting it could be an isolated case. On the monetary policy front, the Fed delivered a widely expected 25 basis point rate hike last week and hinted at just one more rate increase. Still, Fed Chair Jerome Powell said the officials didn't see rate cuts for 2023 and were prepared to prolong their tightening cycle if needed. All eyes now turn to a key measure of US inflation and several speeches from Fed officials this week.

Dollar Holds Decline as Banking Fears Ease

GBPUSD increased to a 7-week high of 1.2343

British Pound Hits 7-week High

The New Zealand dollar rose 0.5% to $0.6229 on Tuesday, strengthening for the third day, as investors were in favour of riskier assets after US authorities backed a deal for First Citizens BancShares to buy Silicon Valley Bank. Also, hopes grew that the hawkish RBNZ will lift its 4.75% cash rate by a quarter point when it meets in April. New Zealand’s annual inflation is currently running near three-decade highs of 7.2%, well above the central bank’s medium-term target of 1%-3%. Governor Adrian Orr recently mentioned that inflation is expected to hit 7.3% in Q1 of 2023 before starting to ease. Meantime, the RBNZ continues to expect the cash rate to peak at 5.5% this year.

NZD Gains for 3rd Session

Sterling rose back above $1.23, not far from a seven-week high of $1.234 touched on March 23rd, after Bank of England Governor Andrew Bailey said on Monday that further monetary tightening would be required if signs of persistent inflationary pressure became evident. He also said there were "big strains" in the global banking sector, but added that banks in Britain were resilient and able to support the economy. Last week, the UK central bank raised its key bank rate by an 11th consecutive time to 4.25% and left the door open for more rate hikes should inflation persist. Recent data had shown Britain's inflation unexpectedly accelerated to 10.4% in February, well above the bank's target of 2%. In the US, the Federal Reserve expects to deliver one more quarter-point rate hike this year, while markets have priced in a near 90% chance of the Fed's standing pat on interest rates in May and anticipate a rate cut in July.

Sterling Appreciates on BoE's Bailey Hawkish Remarks

The euro bounced back above $1.08, moving closer towards a seven-week high of $1.0929 touched last Wednesday, as worries over global banking turmoil and recession eased following news on Monday that regional US lender First Citizens BancShares' bought all of Silicon Valley Bank's deposits and loans. At the same time, investors await key Euro Area inflation data due Friday. The euro will likely continue to appreciate against the dollar as the policy divergence between the European Central Bank and US Federal Reserve is set to widen. ECB President Lagarde said that the central bank is determined to get the inflation back on target and it won’t involve “trade-offs", while board member Isabel Schnabel said the ECB could look for new ways of managing liquidity in the banking sector and steering short-term interest rates in the market. On the other hand, markets price in a near 90% chance the Fed stands pat in May and delivers a rate cut in July.

Euro Gains as Bank Fears Ease

The Australian dollar appreciated toward $0.67 as positive updates surrounding the financial sector raised hopes that the worst of the recent banking turmoil may be over, boosting riskier assets. Traders also digested data showing retail sales in Australia grew more than expected in February, though it slowed sharply from the previous month. Still, the aussie remains close to multi-month lows as the Reserve Bank of Australia stated in its latest policy meeting minutes that it would reconsider the case for a pause at the April fixing to reassess the economic outlook. The RBA raised interest rates by 25 basis points at its March meeting, lifting the cash rate for the 10th straight session and bringing borrowing costs to an almost 11-year high of 3.6%.

Australian Dollar Gains on Risk-On Mood

The dollar index slipped toward 102.5 on Tuesday, falling for the second straight session as fears over the recent banking turmoil started to fade, hurting demand for the safe-haven currency. Investors welcomed reports that First Citizens BankShares agreed to buy significant holdings of Silicon Valley Bank, while CNBC reported that outflows from small institutions to banking giants have slowed. US authorities also aimed to shore up confidence by considering an expanded emergency lending facility and assuring markets that the US banking system was “sound and resilient.” Last week, the Federal Reserve delivered a widely expected 25 basis point rate hike and hinted at only one more increase. Still, Fed Chair Jerome Powell said that officials didn’t see rate cuts for 2023 and were prepared to prolong their tightening cycle if needed. All eyes now turn to a key measure of US inflation and several speeches from Fed officials this week.

Dollar Slips as Bank Concerns Fade

The Canadian dollar was changing hands around $1.37, close to a five-month low of $1.39 from March 9th, on bets that the Bank of Canada would shift to cutting interest rates later this year after the pause in its tightening campaign. Policymakers held the target for its overnight rate unchanged at 4.5% in March, as widely anticipated, and resolved to keep it at the current level should economic conditions develop broadly in line with expectations. On the dollar side, investors remained worried that the recent stress in the US financial system could lead to a credit crunch, worsening the growth outlook.

Canadian Dollar Hovers Near Five-Month Low

The Indian rupee hovered near the 82.3 per USD mark, rebounding slightly after testing the record-low of 83 on March 15th as the Reserve Bank of India resumed selling foreign exchange to support the local currency. Respite for the rupee was also attributed to hawkish signals from the Indian central bank in its monthly bulletin. The body highlighted elevated risks of sticky retail inflation. The rupee had repeatedly sunk to its bottom since the third quarter of 2022 before getting salvaged by RBI intervention due to an unbalanced current account, significant capital outflows, and comparatively soft interest rate hikes by the RBI. Bullish expectations for China led investors to reallocate funds into the country to take advantage of its economic reopening, spurring foreign capital outflows from Indian markets. Also, growth concerns and a wide tolerance band for consumer inflation allowed the RBI to increase rates much slower than other key central banks.

Rupee Rebounds from Record Low

Sterling was at $1.22, slightly down from a seven-week high of $1.234 touched on March 23rd, as investors rushed for safety on worries over the global banking system and the risk of a recession in the US. Global bank shares tumbled last week following the sudden collapse of two US lenders and the rescue of embattled Swiss bank Credit Suisse. Meanwhile, investors welcomed news that First Citizens BancShares Inc would acquire all of Silicon Valley Bank's deposits and loans from the regulator. On the policy front, the Bank of England raised its key bank rate by 25bps to 4.25% and left the door open for more rate hikes should inflation persist. Recent data had shown Britain's inflation unexpectedly accelerated to 10.4% in February, well above the bank's target of 2%. In the US, the Federal Reserve expects to deliver one more quarter-point rate hike this year, while markets have priced in a near 90% chance of the Fed's standing pat on interest rates in May and anticipate a rate cut in July.

Sterling Remains Below 7-Week High

The euro hovered around $1.075, down from a seven-week high of $1.0929 touched last Wednesday, as investors dumped riskier currencies on worries over global banking turmoil and recession. Credit Suisse had to tap the Swiss National Bank for "a large multi-billion amount" to secure its liquidity, while there was some relief that First Citizens BancShares Inc is in advanced talks to acquire Silicon Valley Bank. On Friday, shares of Deutsche Bank tumbled after the bank announced the redemption of $1.5 billion in a set of tier 2 notes due in 2028, and its credit default swaps surged to the highest level since their first introduction in 2019. On the monetary policy front, ECB's Joachim Nagel has stated that if inflation developed as projected, that should not mark the end of the current ECB's hike campaign. In the US, the Federal Reserve expects to bring the interest rates to 5.1% by the end of 2023, while futures show near a 90% chance the Fed stands pat in May and delivers a cut in July.

Euro Remains Below 7-Week Peak at End of March

The New Zealand dollar edged up 0.12% to $0.620 on Monday after falling by 1% last week, when the appeal of the US dollar grew amid fears of a repeat of the systemic banking crisis that swept through markets in 2008. Sentiment remained fragile, however, due to concerns about a global credit crunch. Meantime, IMF chief Kristalina Georgieva said Sunday that 2023 would be another challenging year, with global growth slowing to below 3%, reflecting the impact of pandemic disruptions, the war in Ukraine, and monetary tightening. She added that even with a better outlook for 2024, global GDP growth will remain below its historic average of 3.8% and the overall outlook remained weak. At home, the surprisingly large contraction in New Zealand's GDP in Q4 of 2022 came as the RBNZ is still in the process of cooling runaway inflation. The central bank has lifted its policy rate by a total of 450 basis points in ten straight meetings, pushing the cash rate to a 41-year record of 4.75%.

NZ Dollar Muted

The dollar index steadied around 103 on Monday, holding its recent advance as investors continued to assess the potential trajectory of the recent banking crisis and the outlook for Federal Reserve monetary policy. US authorities aimed to shore up confidence in the US banking system by considering an expanded emergency lending facility for the banking sector and stating that the US banking system was “sound and resilient,” though investors remain wary. Last week, the Fed also delivered a widely expected 25 basis point rate hike and hinted at only one more rate increase. Still, Fed Chair Jerome Powell said that officials don’t see rate cuts this year and are prepared to prolong their tightening cycle if needed. Investors now look ahead to a key measure of US inflation and several speeches from Fed officials this week.

Dollar Holds Recent Advance

The dollar index strenghtened past 103 on Friday, moving further away from a 7-week low of 102 hit in the preivous session, as investors took shelter in the US currency amid instability in the banking sector. The Deutsche Bank said it would redeem $1.5 billion in a set of tier 2 notes due in 2028 and as its credit default swaps surged to the highest since they were introduced in 2019. At the same time, Bloomberg reported that UBS and Credit Suisse are under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. On Thursday, Treasury Secretary Yellen said authorities are prepared for further steps to protect deposits if needed. Earlier this week, the Fed delivered a widely expected 25 basis point rate hike and hinted at only one more rate increase. Still, Fed Chair Jerome Powell said that officials don’t see rate cuts this year and are prepared to prolong their tightening cycle if needed.

DXY Tops 103

The Euro was down nearly 1% to $1.07 on Friday, moving further away from seven-week highs touched on Wednesday, as renewed concerns over the health of the banking sector weighed on investors' risk appetite. News of a U.S. probe on Credit Suisse and UBS and a big drop in Deutsche Bank shares after the lender said it would redeem $1.5 billion in a set of tier 2 notes due in 2028 and as its credit default swaps surged to the highest since they were introduced in 2019, prompted further banking worries. Meanwhile, preliminary PMIs for France, Germany and the Euro Area showed a robust services sector and a fragile manufacturing during March. On the monetary policy front, Bundesbank President Joachim Nagel recently said that “if inflation develops as projected, this should in my view not mark the end of the hike sequence”, signalling further interest rate increases from the ECB.

Euro Depreciates Almost 1%

The British pound fell to below $1.22, weakening from two sessions of gains on renewed banking concerns following reports that UBS and Credit Suisse are under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. Still, the sterling is set for a second consecutive week of gains, after the Bank of England raised its key bank rate by 25bps to 4.25%, as largely expected, and left the door open for more rate hikes should inflation persist. The latest data showed a sustained increase in UK private sector output, largely reflecting a strong performance by the service economy. The PMIs survey suggested that the UK economy grew by 0.2% from the preceding quarter in the first three months of 2023.

Sterling Slips Below $1.23, Still Heads for Weekly Gain

The offshore yuan depreciated past 6.83 per dollar, retreating from five-week highs as lingering concerns about the global banking crisis and brewing Sino-US tensions weighed on sentiment. US lawmakers recently interrogated TikTok’s CEO about potential Chinese influence over the platform, while China’s military said it had driven away a US destroyer that entered waters around the Paracel Islands in the South China Sea. On the monetary policy front, the yuan came under pressure from prospects of increased liquidity after the People’s Bank of China announced a surprise cut to banks’ reserve requirement ratio for the first time this year to aid the economic recovery. The central bank also held its key lending rates steady at its March fixing, with the one-year loan prime rate at 3.65% and that of the five-year at 4.3%.

Chinese Yuan Slips from 5-Week Highs

The Japanese yen appreciated toward 130 per dollar, hitting its strongest levels in six weeks even after data showed that Japan’s annual core inflation rate slowed sharply in February, but an index removing energy costs hit a four-decade high. On the monetary policy front, minutes from the Bank of Japan’s January meeting showed members reiterated the need to maintain ultra-easy policies, as it takes time to reach the 2% inflation target in a sustainable and stable manner. The BOJ left its policy of ultra-low interest rates unchanged at the March meeting, in what was Governor Haruhiko Kuroda’s final policy meeting before his retirement. Meanwhile, the yen also found support after the US Federal Reserve raised rates by 25bps as expected but Fed Chair Powell said during the press conference that the pause in hiking rates was considered to address the banking crises.

Japanese Yen Climbs Despite Easing Inflation

The Australian dollar steadied near $0.67 after facing heightened volatility in recent sessions, as traders weighed a dovish outlook for domestic interest rates against expectations that the US Federal Reserve was also nearing the end of its tightening campaign. The Reserve Bank of Australia stated it would reconsider the case for a pause at April fixing to reassess the economic outlook, according to the latest policy meeting minutes. The RBA delivered an anticipated 25 basis point rate increase at its March meeting, lifting the cash rate for the 10th straight decision and bringing borrowing costs to an almost 11-year high of 3.6%. Meanwhile, the Fed delivered a widely expected 25 basis point rate hike as well, and hinted at only one more rate increase. Still, Fed Chair Jerome Powell said that officials don’t see rate cuts this year and are prepared to raise rates further if needed.

Australian Dollar Struggles for Direction

The dollar index steadied around 102.6 on Friday, with investors still assessing the outlook for Federal Reserve monetary policy as the central bank aims to balance the fight against inflation with lingering concerns about the banking crisis. Earlier this week, the Fed delivered a widely expected 25 basis point rate hike and hinted at only one more rate increase. Still, Fed Chair Jerome Powell said that officials don’t see rate cuts this year and are prepared to prolong their tightening cycle if needed. Meanwhile, Treasury Secretary Janet Yellen reiterated on Thursday that the US government was prepared to take further action if needed to protect depositors. Investors now look ahead to US durable goods, manufacturing and services data on Friday, as well as St. Louis Fed President James Bullard’s speech. The dollar index is on track to lose more than 1% this week.

Dollar Steadies as Fed Outlook Mulled

The Brazilian real was hovering at around $5.30, close to one-month lows, as investors weighed the tougher-than-anticipated tone from the Brazilian central bank against fiscal uncertainty. Brazil's Copom maintained its key interest rate unchanged at 13.75%, as widely expected. However, it surprised analysts by saying it would leave the high level until inflation slows further or even resume the monetary tightening cycle. The lender's inflation projections have risen to 5.8% for 2023 and 3.6% for 2024, linked to fiscal uncertainties and their effect on the debt trajectory. Inflation has cooled to 5.6% in the 12 months through February but remained far above this year's 3.25% official target. The policymakers emphasized while the government's decision to return fuel taxes has helped improve public accounts, the highly volatile financial markets and long-term inflation expectations beyond their targets "require further attention when conducting monetary policy."

Brazilian Real Hovers Around 1-Month Low

The dollar index remained under pressure on Thursday, trading around 102.2, close to low levels not seen since early February, and on track to book a sixth straight session of declines, its longest losing streak in 2-1/2 years. Investors continued to digest the latest FOMC statement and comments from Fed Chair, with market participants split on whether the central bank would cut rates this year despite Jerome Powell pushing back against such moves in 2023. The central body raised the fed funds rate by the expected 25bps and signaled only one more hike this year. Elsewhere, major central banks in Europe, including the BoE, the SNB, and the Norges Bank, continued monetary tightening and showed readiness to lift rates further should inflationary pressures mount.

Dollar on Track for Biggest Losing Streak in 2-1/2 Years

The South African rand appreciated toward 18.1 against the USD, its highest in over a month and moving away from a near three-year low of 18.6 hit on March 21st, amid the dollar's general weakness after the Federal Reserve raised interest rates by the expected 25 basis points and said the fight against inflation might require only one more hike this year. Domestically, a surprise uptick in South Africa's inflation to 7% in February, from 6.9% in the prior month, with core inflation rising to a six-year high of 5.2% reinforced expectations that the central bank would lift the repo rate by 25 bps to 7.50% at its meeting on March 30th. Governor Lesetja Kganyago has repeatedly reiterated the lender would be unwavering in its duty to bring inflation to a sustainable level, but it also needs to deal with a struggling economy.

South African Rand Firms to Over 1-Month High

The British pound held above the $1.23 level in late March, approaching its strongest since June 2022 after the Bank of England raised its key bank rate by 25bps to 4.25%, as largely expected, and left the door open for more rate hikes should inflation persist. The move lifted borrowing costs to their highest since 2008, as the central bank underscored that it pursues price stability over short-term volatility for British banks. The decision came as fresh data showed that inflation in the UK rose to 10.4% in February, overshooting expectations of 9.9% to unexpectedly accelerate from the 10.1% in the previous month. In the meantime, the sterling was also supported by pressure on the greenback amid the dovish tone from the Federal Reserve in its latest meeting. The dollar also weakened on continued uncertainty regarding the health of US banks after Treasury Secretary Yellen said the government will not blankly protect all deposits in the banking system.

British Pound Holds Above $1.23 After BoE

The Turkish lira was steady at the record low of 19 per USD in late March after the central bank of Turkey held its key interest unchanged at 8.5%, as expected. The move followed a 50bps interest rate cut in February, when the TCMB returned to slashing interest rates to further loosen financial conditions and stimulate supply chains in response to Turkey’s devastating earthquake. The central bank has cut its key rate by 10.5 percentage points since September 2021, triggering a crisis for the lira, soaring inflation, and a largely unbalanced current account. Inflation in Turkey soared to 86% in October before easing back to 55% in February, as the lira plunged by 56% since the start of the bank's cutting cycle and compounded surging energy costs that Turkey must import. The TCMB also extended anti-dollarization strategies to support the currency.

Turkish Lira Holds at Record-Low after Rate Decision

The Swiss franc strengthened to 0.91 per USD, approaching the robust levels of the last week, after the Swiss National Bank moved forward with a 50bps increase in borrowing costs as expected, citing a renewed rise in inflationary pressure and discarding the recent turmoil in the banking sector and the Credit Suisse takeover. The central bank noted that measures announced by the federal government, FINMA, and the SNB had put a halt to the crisis and reiterated it was providing large amounts of liquidity assistance in Swiss francs and foreign currencies, backed by collateral and subject to interest. Inflation in Switzerland unexpectedly rose to 3.4% in February, overshooting market expectations of 3.1% and SNB forecasts of 3%.







.

Swiss Franc Appreciates after SNB Hikes Rates

The offshore yuan strengthened past 6.83 per dollar, hitting its highest levels in five weeks as the Federal Reserve delivered a widely expected 25 basis point rate hike and signaled that the end of its tightening campaign could be in sight. Still, traders remain cautious as Fed Chair Jerome Powell said officials don’t see rate cuts this year and that they are prepared to raise rates higher than expected if needed, while US Treasury Secretary Janet Yellen’s latest comments reignited concerns about the banking crisis. The yuan came under pressure recently from prospects of higher liquidity after the People’s Bank of China announced a surprise cut to banks’ reserve requirement ratio for the first time this year to aid the economic recovery. The central bank also held its key lending rates steady at its March fixing, keeping the one-year loan prime rate at 3.65% and that of the five-year at 4.3%.

Chinese Yuan Climbs to 5-Week Highs

The New Zealand dollar appreciated past $0.625, marching toward its highest levels in five weeks as the Federal Reserve delivered a widely expected 25 basis point rate hike and signaled that it could be nearing the end of its tightening campaign. Still, traders remain cautious as Fed Chair Jerome Powell said officials don’t see rate cuts this year and that they are prepared to raise rates higher than expected if needed, while US Treasury Secretary Janet Yellen’s latest comments reignited concerns about the banking crisis. Domestically, the Reserve Bank of New Zealand raised interest rates by 50 basis points in a widely anticipated move at its February fixing. The board cited elevated inflationary pressures, higher prices expectations, and tight labor markets as factors of consideration. The RBNZ has lifted its policy rate by a total of 450 basis points in ten consecutive meetings, bringing the cash rate to a 41-year record of 4.75%.

NZ Dollar Jumps on Dovish Fed Bets

The Australian dollar appreciated past $0.67, inching closer to multi-week highs as the Federal Reserve delivered a widely expected 25 basis point rate hike and signaled that the end of its tightening campaign could be in sight. Meanwhile, traders remain cautious as Fed Chair Jerome Powell said officials don’t see rate cuts this year and that they are prepared to raise rates higher than expected if needed, while US Treasury Secretary Janet Yellen’s latest comments reignited concerns about the banking crisis. Locally, the Reserve Bank of Australia said it would reconsider the case for a pause at the April meeting to reassess the economic outlook, according to the latest policy meeting minutes. The RBA delivered a widely expected 25 basis point rate hike at its March meeting, lifting the cash rate for the 10th straight decision and bringing borrowing costs to an almost 11-year high of 3.6%.

Aussie Gains on Fed Rate Hike Pause Bets

USDCNY decreased to a 5-week low of 6.8307

Chinese Yuan Hits 5-week High

The dollar index fell toward 102 on Thursday, remaining under pressure near seven-week lows as the Federal Reserve delivered a widely expected 25 basis point rate hike, but dropped language about “ongoing increases” being needed and hinted at just one more rate rise. Still, Fed Chair Jerome Powell said officials don’t see rate cuts this year and that they are prepared to raise rates higher than expected if needed. Meanwhile, Treasury Secretary Yellen told lawmakers that the US government was not considering a “blanket insurance” for bank deposits, reigniting concerns about the banking crisis. Investors now look ahead to the weekly jobless claims and new home sales data in the US on Thursday. Elsewhere, the Bank of England is expected to tighten policy further on Thursday after a hotter-than-expected inflation print for the UK.

Dollar Languishes as Fed Outlook Mulled

The Singaporean dollar strengthened 0.3% to 1.32 against the US dollar on Thursday, trading at a six-week high, as the dollar index fell, after the US Federal Reserve raised its key rate by a 25 bps, and pointed to just one more rate hike this year. Traders now await the February annual inflation data later today. The annual inflation rate in Singapore is expected to slow to a nine-month low of 6.45% in February, easing from a 6.6.% rise in the previous month.

Singaporean Dollar Rises to 6-Week High

The Aussie gained nearly 1% to $0.67, the highest in nearly two weeks, after the Fed delivered another 25bps rate hike as expected but set a more dovish tone, with Fed Chair Powell saying during the press conference that the pause in hiking rates was considered to address the banking crises. In Australia, the Reserve Bank of Australia said it would reconsider the case for a pause at the April meeting to reassess the economic outlook, according to the latest policy meeting minutes. The minutes also showed the RBA board deemed monetary policy restrictive and the economic outlook uncertain. The country's central body delivered a widely expected 25 basis point rate hike at its March meeting, lifting the cash rate for the 10th straight decision and bringing borrowing costs to an almost 11-year high of 3.6%.

Breaking News

Follow what's happening with real-time updates from around the world.