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© Reuters.
By Peter Nurse
Investing.com – The dollar loses positions at the start of trading on Monday in Europe as traders reassess the likelihood of another interest rate hike by the Federal Reserve later this month given the ongoing crisis United States bank.
By 09:10 AM ET (0910 GMT), the , which tracks the currency against a basket of six other major currencies, was down 0.6% at 103.528, near 1-month lows.
The US authorities decided to intervene this weekend and cover all depositors of Silicon Valley Bank, which had to go out of business last week, as well as depositors of SignatureBank, which was liquidated over the weekend.
Both the US Treasury and the US Federal Reserve wanted to ensure that the second and third largest bankruptcies in US banking history did not have a major impact, announcing emergency financing measures for the sector.
The news also boosts expectations that the United Kingdom will refrain from raising interest rates by 50 basis points next week, given the strain on the US banking system.
Influential investment bank Goldman Sachs said on Sunday that it no longer believes the US central bank will raise rates at its meeting on March 22, after previously forecasting a 25 basis point hike.
“Pressure on the US banking system is casting doubt on whether the Fed can go through with such an aggressive tightening cycle,” ING (AS:) analysts say in a note. “Normally you would think a stock selloff is bullish for the dollar, but it might not be if the epicenter of the current stress is the US banking system.”
Elsewhere, the pair rises 0.8% to 1.0730, near 1-month highs, with the single currency benefiting from dollar selling.
In addition, the meets this week and is expected to raise interest rates by 50 basis points, as last week’s inflation data indicates that underlying price pressure remains high.
The pair rises 0.6% to the 1.2105 level, helped by news that HSBC has agreed with the Bank of England to buy Silicon Valley Bank’s UK operations, helping to ensure that no there is a risk of contagion from the collapse of the US lender late last week.
The UK government also presents on Wednesday the , and Chancellor Jeremy Hunt is expected to prioritize maintaining public finances, given the difficulties of his predecessor.
Pair is down 0.2% to 134.60, not far from its 1-month high, pair is up 1.4% to 0.6670, on track for its biggest intraday percentage rally since 6 January, and the drops to 6.9033.
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