The dollar is getting cheaper against the euro, the yen and the pound sterling in trading on Friday due to improvement in traders’ mood and a decrease in demand for safe haven assets amid waning fears about the growing problems in the U.S. banking sector.
Earlier it became known that the American First Republic Bank, faced with the outflow of investors’ funds from deposits due to the situation with Silicon Valley Bank, received $30 billion in aid from 11 major U.S. banks, including JPMorgan Chase & Co. (SPB: JPM), Bank of America Corp. (SPB: BAC), Citigroup Inc. (SPB: C) and Wells Fargo & Co.
Moreover, the financial institutions said they have confidence “in banks of all sizes” and are willing to help them if necessary.
The news supported stock markets and other risky assets and helped weaken the U.S. dollar, Trading Economics noted.
The ICE-calculated index showing the dynamics of the dollar against six currencies (euro, Swiss franc, yen, Canadian dollar, pound sterling and Swedish krona) lost 0.34% in trading, while the broader WSJ Dollar Index lost 0.36%.
The euro/dollar pair is trading at $1.0650 as of 8:15 a.m., up from $1.0612 at market close on Thursday.
The day before, the European Central Bank (ECB) raised all three key interest rates by 50 basis points (bps), as planned, despite turbulence in the financial sector.
The ECB raised the benchmark lending rate to 3.5%, the deposit rate to 3% and the marginal lending rate to 3.75%.
In addition, the regulator lowered inflation forecasts in the eurozone for 2023-2025, and improved its GDP growth forecast for the current year.
ECB President Christine Lagarde said in a press conference after the meeting that the central bank has not abandoned its commitment to fighting high inflation, but in the current situation can’t talk about how key interest rates will change in the future.
The Federal Reserve (Fed) will hold its next meeting next week. Traders expect it to raise the rate by a maximum of 25 basis points, notes Bloomberg.
The cost of American currency in pair with yen fell to 133 yen during Friday’s trading against 133.75 yen by the end of the previous session.
Exchange rate of the pound to the dollar is $1.2157, compared to $1.2110 the day before.
