The US Federal Reserve, European Central Bank (ECB), and Swiss National Bank (SNB) separately expressed their commitment to maintaining banking stability.
The US Dollar Index (DXY) continued to decline towards the 104.00 thresholds in Friday's (March 17) trading as market panic related to the global banking crisis subsided. Major currency pairs rapidly strengthened, mainly AUD/USD, NZD/USD, and EUR/USD.
DXY Daily chart via TradingView
The US dollar index (DXY) continued to decline towards the threshold of 104.00 on Friday (March 17) as market panic related to the global banking crisis receded. Major currency pairs were observed to strengthen rapidly, especially AUD/USD, NZD/USD, and EUR/USD.
The US Federal Reserve, European Central Bank (ECB), and Swiss National Bank (SNB) separately expressed their commitment to maintaining banking stability by providing additional liquidity and other policies if necessary. Their announcements contributed to maintaining market confidence.
Some troubled banks in the US and Europe also received timely assistance, thus avoiding systemic impacts. The Federal Deposit Insurance Corporation (FDIC) took over Silicon Valley Bank and Signature Bank. Eleven banks extended funds of USD 30 billion to "rescue" First Republic Bank in the United States. Meanwhile, Credit Suisse said it would borrow around USD 54 billion from SNB to strengthen its credibility.
The news restored market confidence that had plummeted due to the Silicon Valley Bank and Credit Suisse crises in recent days. Sentiment also improved following the ECB's decision to raise interest rates by 50 basis points yesterday.
EUR/USD strengthened to the range of 1.0665 in today's trading. The euro positively responded to the ECB's interest rate decision yesterday, although some market players chose to "wait and see" ahead of the Eurozone inflation data release today.
"The euro zone banking sector remains in reasonably solid shape," said Wells Fargo international economist Nick Bennenbroek. "Should market strains ease and volatility recede in the weeks and months ahead, persistent inflation should in our view be enough to elicit further (ECB) tightening."
The improvement in sentiment does not mean that all concerns have disappeared. USD/JPY weakened today at levels around 132.90, still within the one-month low range it reached since the Silicon Valley Bank crisis emerged. EUR/JPY also remained at around 141.70.
Some analysts believe that the situation of these currency pairs indicates that some market participants still worry about the threat of a broader banking crisis in the United States and Europe. Some experts highlight that many small banks with weaker capital resilience are not part of the "too big to fail" banking group, so the possibility of bankruptcy or liquidation without adequate bailout funds remains high.