Dollar sinks as US intervenes on SVB collapse
Reuters March 13, 2023
By Ankur Banerjee

SINGAPORE (Reuters) - The U.S. dollar fell sharply on Monday as authorities stepped in to cap the fallout from the sudden collapse of Silicon Valley Bank, with investors hoping the Federal Reserve will take a less aggressive monetary path.

The U.S. government announced several measures early on Monday Asian hours, and said all SVB customers will have access to their deposits starting on Monday. Officials also said depositors of New York's Signature Bank, which was closed Sunday by the New York state financial regulator, would also be made whole at no loss to the taxpayer.

The Fed also announced it would make additional funding available through a new Bank Term Funding Program, which would offer loans up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.

The dollar index, which measures the U.S. currency against six rivals, fell 0.528% at 103.69, its lowest in nearly a month after Goldman Sachs said it no longer expects the Fed to deliver a rate hike at its March 22 meeting. It had previously expected a 25 basis point hike.

The SVB collapse led investors to speculate that the Fed would now hesitate to hike interest rates by a super-sized 50 basis points this month. Investor focus will now be on Tuesday's inflation data to gauge how hawkish the Fed is likely to be.

"From the perspective of the FOMC, their concern is still inflation and inflation has not really decelerated," Carol Kong, currency strategist at Commonwealth Bank Of Australia, adding that Tuesday's CPI will continue to show that inflation remains persistently high.

"Given what's happened in the U.S. financial system, a 25 basis point hike is more likely than a 50 basis point hike."