Dollar up on earnings, economy concerns; Euro falls.

The Dollar Rises as Global Economy Worries Deepen

The U.S. dollar index rose on Tuesday as concerns about earnings and the global economy outlook deepened, causing the euro to fall from its 10-month high. The dollar index was up 0.2% at 101.37, having dropped over 3.3% since the beginning of March. The news of plunging deposits at First Republic Bank served as a reminder that stability risks have not entirely died down, while UBS reported a 52% slide in quarterly income.

Central Banks to Cut Dollar Liquidity Operations with the U.S. Federal Reserve

Central banks around the world are to cut the frequency of their dollar liquidity operations with the U.S. Federal Reserve from May, another sign that March’s financial market volatility is essentially over. However, safe haven currencies such as Japan’s yen firmed, even as the Bank of Japan’s (BOJ) new governor Kazuo Ueda signalled he was not in a hurry to shift policy. This week’s BOJ meeting, which concludes on Friday, is his first in charge.

Prospect for a Stronger Yen

“I see a prospect for a stronger yen on the back of monetary tightening in Japan but also because we’re reaching the end of the tightening cycle in the U.S.,” said Jens Nærvig Pedersen, director, FX and rates strategy, at Danske Bank. The yen rose 0.3% to 133.855 per dollar and was up 0.4% to 147.67 per euro, having earlier touched an eight-year low of 148.635.

Euro Holding Above $1.10

The euro was down around 0.1% against the dollar but still holding above $1.10, having risen 1.7% so far in April and over 4% since the beginning of March. “The euro has performed well against most currencies recently because of the optimism around the outlook for the euro zone economy and the market anticipating more rate hikes from the ECB (European Central Bank),” said Danske Bank’s Pedersen.

Swiss Franc Benefits from Safe Haven Status

The Swiss franc was benefitting from its characterisation as a safe haven, rising 0.1% against the stronger dollar. According to Electronic Broking Services data stretching back to the early 2000s, the Swiss currency also hit its highest against the yen in two decades at 151.36.

Sterling Close to 10-Month High

Sterling was down 0.1% at $1.2473, but was close to a 10-month high of $1.2545 reached earlier this month. The Australian dollar was softer at $0.6654 as traders waited for inflation data due on Wednesday, while the kiwi was at $0.6152.

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