2023.04.0314:08:00UTC+00Dollar Weakens As Banking Crisis Abates

The Dollar weakened against major currencies in the last week of March 2023, amidst an easing in the bank crisis that rocked the U.S almost a fortnight earlier. The U.S. Dollar weakened against the euro, the British pound, the Australian Dollar, the Swiss Franc and the Canadian Dollar but gained against the Japanese Yen.

The Dollar opened the week spanning March 27-31 on a strong note and gained ground on news that First Citizens BancShares had agreed to acquire Silicon Valley Bank's deposits and loans. The Dollar Index (DXY) which measures the Dollar's strength against a basket of six currencies touched the week's high of 103.23 on Monday amidst the positive development. Thereafter the DXY dropped to as low as 102.05 by Friday as buying interest shifted to risky assets. The easing in the Fed-preferred PCE inflation readings also aided the Dollar's retreat. From 103.12 on March 24, the DXY declined half a percent to 102.59 in a week's time.

The Euro too opened strong on Monday, March 24, recovering from the lows touched on Friday when the rising costs of insuring bonds of Deutsche Bank had dragged the Euro lower. With an easing in the banking crisis, the EUR/USD pair recorded a weekly gain of 0.74 percent as it rallied to 1.0839 from 1.0759 a week earlier. The pair ranged between a low of 1.0745 touched on Monday and a high of 1.0927 touched on Thursday and Friday.

The GBP/USD pair strengthened 0.84 percent during the week ended March 31, from 1.2230 to 1.2333. The pound received support from Bank of England Governor Andrew Bailey who reiterated that inflation continued to be the focus of monetary policy. From the low point of 1.2218 touched on Monday, the pair increased all the way to 1.2424 on Friday, before shedding some gains and closing the week at 1.2333.

Strong retails sales data supported the Australian Dollar in its 0.60-percent rally from 0.6645 to 0.6650. The Dollar's retreat saw the AUD/USD pair surge all the way, from a weekly low of 0.6633 at the beginning of the week to a weekly high of 0.6739 by Friday.

The safe-haven yen lost its appeal and weakened with an abatement in the banking crisis. The USD/JPY pair increased 1.61 percent to 132.79, from 130.69, a week earlier. The pair ranged between the low of 130.40 on Tuesday and the high of 133.61 on Friday.

The surprise cut in production announced by the OPEC on Sunday has triggered a reassessment of the outlook for monetary policy. Amidst fears of further rate hikes, the EUR/USD pair has increased to 1.0901, the GBP/USD pair has strengthened to 1.2407 and the AUD/USD pair has rallied to 0.6778. The USD/JPY pair has decreased to 132.57 whilst the Dollar Index has dropped to 102.25.