Foreign exchange remind: cool banking concerns the yen, the dollar fell waiting to battle the fed's decision

At the beginning of the Asian market on Monday (March 22), the US dollar index hovered around a low of more than a month and is currently trading around 103.17. The market's concerns about the banking industry in Europe and the United States have cooled somewhat. UBS and First Republic Bank of America's shares rose sharply on Tuesday, while the safe-haven yen suffered a sell-off. The dollar rose 0.9% against the yen on Tuesday, while the safe-haven dollar also fell slightly by 0.07% on Tuesday.

Sterling also performed poorly on Tuesday, falling 0.5% to 1.2205 against the dollar on Tuesday, as traders believe that banking pressure may prevent the Federal Reserve and the Bank of England from raising interest rates significantly or not at all later this week.

UBS's stock price rebounded more than 10% on Tuesday, providing support for the euro, which rose 0.45% against the dollar on Tuesday, hitting a new intraday high of 1.0788, ending at 1.0764.

Investors' attention has shifted to a series of central bank meetings to be held this week, after days of volatility in the market due to concerns about the stability of the global banking industry.

The dollar index fell 0.07% to 103.24 on Tuesday. The market expects that when the Federal Reserve announces its monetary policy decision on Wednesday, the probability of raising interest rates by 25 basis points is 85%. A few weeks ago, the market expected the Federal Reserve's benchmark overnight interest rate to peak at 5.5%, while now it is forecast to be around 4.8%.

The dollar followed these expectations, but widespread nervousness in the financial markets restrained selling.

Market sentiment is fragile, with investors worried about the future of the banking industry. On Monday, the stock price of First Republic Bank of America plummeted nearly 50% due to concerns about its need for a second bailout. However, on Tuesday, the stock price of First Republic International soared by 60% in the intraday trading, and it still closed up 29.5%.

Edward Moya, senior market analyst at OANDA, said, "The (Federal Reserve) should send a signal that inflation is still the focus now, but it is clear that it is necessary to appropriately explain what has been done and emphasize what else they can do to prevent further spread of the turmoil outside the First Republic Bank."

The sharp rebound in European and American banking stocks reflected a cooling of market anxiety. The safe-haven yen fell sharply on Tuesday, while the dollar rose 0.9% against the dollar on Tuesday, the largest one-day gain in nearly a month and a half, to close at 132.48.

US Treasury Secretary Yellen told bankers on Tuesday that she was prepared to intervene to protect depositors at smaller US banks if there was a risk of a run on them.

Mazen Issa, senior foreign exchange strategist at TD Securities, said, "It seems that after several weekends of promoting policy support and some (Treasury) officials hinted that they would guarantee deposits at all costs, the hint given to me was that interest rates could continue to be raised."

The pound fell 0.5% against the dollar on Tuesday, away from a nearly seven week high after data showed that the UK recorded a 16.68 billion pound ($20.4 billion) budget deficit in February, well above expectations in a Reuters survey. And market expectations for the Bank of England's suspension this week have increased.

Morgan Stanley analysts said that over the past month, sterling has continued to trade in a very narrow range against the dollar, hovering around 1.20. Morgan Stanley economists maintain a neutral stance on sterling and tend to be bearish. Economists at the Bank believe that the current UK budget is mainly focused on the supply side, with private sector compensation cooling more than expected by the Bank of England. The global context currently includes rising uncertainty and concerns about financial stability.

Morgan Stanley analysts predict that the Bank of England may become the first central bank in the G3 to suspend raising interest rates at an upcoming meeting.

The minutes of the March 7 policy meeting released by the Federal Reserve of Australia on Tuesday showed that officials agreed to consider suspending interest rate hikes at the April meeting, even before the latest wave of shocks affected the Australian dollar. The Australian dollar fell 0.74% to close at $0.6665 on Tuesday.

Issa said, "In places like Canada or Australia, these central banks basically say they have completed the stage of tightening interest rates, and their currencies lag behind those that are still raising interest rates."