Foreign Exchange Report - 13.03.2023

The Dollar registered a sharp decline on Monday on the increasing probability of the Federal Reserve adopting a less aggressive monetary stance as authorities intervened to curb the fallout from the collapse of Silicon Valley Bank (SVB). The US government has unveiled a series of measures, stating all SVB clients will have access to their deposits from Monday. The Fed stated additional funding would be made available via a new Bank Term Funding Program, offering loans to depository institutions of up to one year, backed by Treasuries and other assets, Reuters reports. The subsequent turmoil following the SVB collapse sparked investor rumours that the Fed would not increase rates by 50 basis points later this month. The Dollar index – measuring the greenback against six peers - fell 0.55%, close to one-month lows of 103.67. “From the perspective of the FOMC, their concern is still inflation, and inflation has not really decelerated,” said Carol Kong, Commonwealth Bank Of Australia currency strategist. “Given what's happened in the US financial system, a 25-basis point hike is more likely than a 50-basis point hike.” As it stands, the market is pricing in close to an 18% chance the Fed will remain with the current rate and an 82% chance of a 25-basis point rise.

Elsewhere, Sterling was trading at $1.2114 at the time of writing, a 0.71% increase on the day. Whilst the Euro rose 0.72% to $1.072, close to the one-month top of $1.0737 previously reached.

In addition, the Japanese Yen gained 0.61% against the US Dollar to 134.18 per Dollar after hitting a one-month high previously in the session of 133.58. Whereas the Australian Dollar rose 1.31% to $0.666, on course for its largest one-day percentage increase since 6th January. The New Zealand Dollar, meanwhile, rose 1% to $0.620.

Furthermore, India’s Rupee edged up against the Dollar on Monday but fell short of opening highs due to Dollar demand from importers and speculators. At the time of writing, the Rupee stood at 81.90, compared to the previous session’s 82.04 mark. The Rupee opened trading at 81.76.

Moving to South Africa, the Rand stood firm in early Monday trade at 18.1875 against the greenback, a gain of around 0.8% since the previous close.

Interested in finding out how we can help you get the most from your funds? Drop me a message to schedule your complimentary financial?review.