Safe-haven dollar slides as bank fears ease; yen surges

By Kevin Buckland

TOKYO (Reuters) – The U.S. dollar slid for a second day against major peers on Tuesday as receding fears of a full-blown banking crisis sapped demand for the safest assets.

The yen, traditionally also a safe haven, however, rebounded strongly for overnight losses, with analysts pointing to likely repatriation of overseas profits by Japanese corporations into the end of the country’s fiscal year on Friday.

The risk-sensitive Australian dollar also jumped, while the euro and sterling pushed higher.

The U.S. dollar index – which gauges the currency against six peers, including the yen – declined 0.14% to 102.6 during Asian trading, extending Monday’s 0.35% drop.

The greenback dropped as much as 0.86% to 130.62 yen at one point, and was last off 0.55%, undoing most of the previous session’s 0.64% jump, when it tracked a 15 basis point surge in long-term Treasury yields, the biggest in six months. The 10-year yield was little changed in Tokyo trading on Tuesday at around 3.52%.

“The time of the year – the Japanese fiscal end – I think there are some flows from Japanese repatriating,” said Bart Wakabayashi, branch manager at State Street (NYSE:STT) in Tokyo.

“If that’s it, it’s pretty much a one-off, and then we’ll get back to basics, which is essentially following yields.”

While the market is taking some solace from First Citizens BancShares’ agreement to buy all of Silicon Valley Bank’s deposits and loans, Wakabayashi says no one is being complacent.

“There is a big cloud – I won’t say dark cloud, but definitely a cloud – and I think people are at least positioning for what they need to do if this thing moves in the wrong direction,” he said.

“For the moment, dollar is king – dollar is paying interest rates, dollar is safe. Even if it gets sold off, it won’t be huge, and it will bounce back.”

The dollar index reached a three-month high of 105.88 on March 8, before sliding as low as 101.91 last week as risk sentiment waxed and waned with the banking headlines.

The euro was 0.13% stronger at $1.08135 on Tuesday, while sterling added 0.24% to $1.2316.

The Aussie rallied 0.41% to $0.66785. New Zealand’s kiwi dollar rose 0.37% to $0.6219.

Bitcoin edged slightly lower to around $27,029, remaining on the back foot after a 3% slide on Monday, when cryptocurrency exchange Binance temporarily suspended some operations due to technical glitches.