Forex Today – Asian Session: Dollar Extends Fall as Markets Reconsider Fed’s Next Move

Here’s what you need to know on Tuesday, March 14:

The failure of Silicon Valley Bank (SVB) and Signature Bank hit markets unexpectedly, creating a crisis of confidence that continues to spread. The Federal Reserve announced that it will make additional funds available to help ensure banks have the ability to meet the needs of all their depositors. US President Biden spoke on Monday and said that taxpayer money would not be used to bail out the banks. The impact has been great enough that a 50 basis point hike by the Federal Reserve at the March 21-22 meeting now seems unlikely.

The SVB plunge sent US stock markets to monthly lows. The Nasdaq managed to recover and gained 0.45%, while the Dow Jones lost 0.28% and the S&P 500 fell 0.15%. The VIX rose 6% after pulling back during the second half of the US session.

The dollar fell sharply at the beginning of the week, affected by the decline in US yields, as markets consider the possibility that the Fed will not raise interest rates at the March meeting. As a consequence, US yields suffered the biggest three-day drop in three decades.

On Tuesday, the US Consumer Price Index (CPI) will be released at 12:30 GMT (Daylight Saving Time began on Sunday, so the time for major US releases has changed). The figures will be closely monitored to see how the fight against inflation is going. Prior to the SVB crisis, the US CPI was seen as a critical report for the Fed’s upcoming monetary policy decision. At the moment, markets see a more dovish Fed as their focus is on the impact of the banking crisis.

USD/JPY fell for the third day in a row, paring losses during the American session after recovering above 133.00. EUR/USD broke above 1.0700, hitting the strongest level in a month. They report that the European Central Bank will raise rates 50 basis points on Thursday, despite the SVB turmoil. The EUR/GBP pair fell back to 0.8800. GBP/USD It rose sharply from around 1.2050 towards 1.2200.

HeAUD/USD and the NZD/USD they took advantage of the weakness of the dollar and went up to 0.6700 and 0.6250, respectively. For now, the risk aversion environment is not affecting commodity currencies. Latin American currencies fell again, and USD/MXN reached levels above 19.00.

Prices of the Crude oil fell more than 2%. WTI ended around $74.50, avoiding a daily close below the January or February lows that would have increased bearish pressure. Bitcoin rose more than 10% and surpassed $24,000.
He Gold broke above $1,900, its highest level since early February, buoyed by the recovery in the bond market. The silver it shot up more than 6%, approaching $22.00.