- Bank crisis worries rock Asia’s currency markets as safe havens rise.
On Thursday, most Asian currencies maintained a narrow range as a banker shifted mostly into safe-haven currencies due to worries about broader economic headwinds and resurrected concerns over the U.S. and European financial crises.
The Thai baht, which was valued as a safer option among risk-heavy Southeast Asian currencies, climbed 0.4%, making it one of the day’s top performers. The Japanese yen was among the best performers, increasing by 0.5% and maintaining proximity to its highest level in a month.
Although Goldman Sachs raised its prediction for Chinese economic growth in 2023 to 6% from 5.5%, the Chinese yuan remained unchanged.
As China emerges from three years of COVID lockdowns, the forecast, which is higher than the 5% stated by the Chinese government, helped fuel some confidence about an economic comeback in China.
Yet, a lack of appetite for risk caused the yuan to revert to the crucial 7 levels against the dollar.
Following a crash in the shares of troubled Swiss lender Credit Suisse Group AG on Wednesday, concerns about a potential banking catastrophe returned to the forefront (SIX: CSGN). Yet, the firm was successful in obtaining a $54 billion credit line from the Swiss National Bank, which allayed some worries about a quick collapse of the banking industry.
But as investors turned away from risky assets, this did little to help Asian currencies. On Thursday, most regional currencies were little changed, although the Malaysian ringgit led declines with a 0.6% drop.
The dollar slightly declined versus a basket of currencies, but it had made significant gains the previous night. After rising 1% in overnight trade, the dollar index and dollar index futures decreased by 0.1%.
The greenback was boosted primarily by safe-haven demand, but it also saw bids amid increased uncertainty about the path of US monetary policy. The focus has shifted to a Federal Reserve meeting next week, where the bank is anticipated to raise interest rates by 25 basis points.
Yet, concerns over a developing bank crisis following the failure of three smaller U.S. banks led traders to wonder if the Fed will have enough economic flexibility to continue hiking rates. That led to significant declines in the rate of the dollar earlier this week, which helped Asian currencies.
The European Central Bank, which will likely decide on interest rates later in the day and boost them by 50 basis points, was also in the spotlight. In Asian trading, the euro increased by 0.3%.
Stronger-than-expected job figures increased expectations of additional Reserve Bank interest rate hikes, and the Australian dollar was one of the day’s few outliers, climbing 0.4%.
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