In the News

Yen, Swiss Franc Surge on Haven Bid as Banking Worries Flare

(Bloomberg) -- The US dollar slid to its weakest level in a week, tracking Treasury yields lower as a surprise quarterly loss from New York Community Bancorp renewed concerns about the finances of regional banks and drove investors into the Japanese yen and Swiss franc.

  • Dollar slides along with Treasury yields after bank’s loss
  • Data showing cooling labor-market pressure also play a role

The US dollar slid to its weakest level in a week, tracking Treasury yields lower as a surprise quarterly loss from New York Community Bancorp renewed concerns about the finances of regional banks and drove investors into the Japanese yen and Swiss franc.

A Bloomberg gauge of the dollar fell as much as 0.3%, with data showing a cooling of labor costs and a faster-than-expected slowdown in hiring contributing to the decline by stoking bets that the Federal Reserve will start cutting rates as soon as March.

The specter of building strain in the US banking system bolstered traditional haven currencies, where investors often seek temporary refuge during times of financial-market uncertainty.

 

The yen jumped as much as 1% to a session high of 146.08 per dollar, its strongest level in two weeks, while the Swiss franc advanced 0.8% to 0.8551 per dollar. Treasury yields retreated across the curve, led by front-end tenors.

The unexpected loss from New York Community Bancorp sent its share price tumbling and evoked the fears of a banking crisis that flared briefly last year after the collapse of Silicon Valley Bank.

“The markets are likely using the price action from last year as a template when concerns about the US regional banks fueled expectations of aggressive emergency rate cuts from the Fed,” said Valentin Marinov, head of G-10 FX research and strategy at Credit Agricole, adding the yen would be the biggest beneficiary of softer US yields in the near-term.

The moves come ahead of the release of the Fed’s policy decision at 2 p.m. New York time Wednesday. The FOMC is widely expected to hold rates steady at this meeting, but swaps traders raised expectations of easing in March following the report from New York Community Bancorp.

“In conjunction with some cracks, especially increasing consumer debt, in the larger US economy picture, a haven flight makes sense,” Helen Given, an FX trader at Monex. “We’ll have to see if we see any further contagion like we did early last year, but definitely not a good sign.”

 

Reporting by Carter Johnson and Anya Andrianova

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