The dollar index (DXY00) on Monday fell by -0.38% and posted a 1-month low. The dollar fell on reduced liquidity demand due to a rebound in stocks and the boost in dollar funding by the Fed and five other central banks. The dollar was also under pressure on speculation that the Fed may adopt a more cautious tone during the Tue/Wed FOMC meeting and could possibly dial back its quantitative tightening to preserve the amount of bank reserves in the financial system.
Sunday’s action by five central banks to boost dollar liquidity was bearish for the dollar. The Federal Reserve, Bank of Canada, Bank of England, European Central Bank, Bank of Japan and the Swiss National Bank announced that they will "increase the frequency of 7-day maturity operations from weekly to daily" to boost dollar funding and ease growing strains in the global financial system.
EUR/USD (^EURUSD) on Monday rose by +0.47%.  The euro Monday rallied moderately on dollar weakness, and reduced European banking concerns after UBS Group AG agreed to buy Credit Suisse Group AG for 3 billion francs ($3.2 billion) in a government-brokered deal. Hawkish comments Monday from ECB Governing Council member Kazaks also gave EUR/USD a boost when he said price pressures remain too strong and warrant further action from the ECB.Â
German Feb PPI eased to +15.8% y/y from +17.6% y/y in Jan, the slowest pace of increase in 17 months.
ECB Governing Council member Kazaks said price pressures remain too strong and warrant further action, assuming the market turmoil that rocked the banking sector doesn't worsen to derail Europe's economy.
USD/JPY (^USDJPY) on Monday fell by -0.31%. The yen Monday climbed to a 5-week high against the dollar. The ongoing U.S. and European banking woes have boosted safe-haven demand for the yen. Also, the -1.4% fall in the Nikkei Stock Index Monday boosted safe-haven demand for the yen. The yen fell back from its best levels Monday after T-note yields rebounded from early losses and moved higher.Â
April gold (GCJ3) on Monday closed up +9.30 (+0.47%), and May silver (SIK23) closed up +0.184 (+0.82%). Precious metals Monday posted moderate gains, with gold climbing to a 1-year high and silver posting a 6-week high. A fall in the dollar index Monday to a 1-month low was bullish for metals. Also, the banking turmoil in the U.S. and Europe increased the safe-haven demand for precious metals. Fund buying of gold is supporting prices as gold holdings in exchange-traded funds (ETFs) have risen five straight days through last Friday to a 3-1/2 week high. Precious metals fell back from their best levels Monday after a stock recovery boosted global bond yields.
More Precious Metal News from Barchart
- Rebound in Bank Stocks Lifts Broad Market
- Dollar Dragged Lower by Decline in T-Note Yields
- Stocks Fall as Bank Concerns Linger
- Dollar Slips as Stocks Rebound and Euro Strengthens on the ECB’s Rate Hike
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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