USD is falling as risk appetite improves

The dollar fell on Friday as risk appetite improved after authorities and banks in key markets moved to ease pressure on the financial system, calming other major currencies that had fallen earlier in the week in the wake of banking turmoil.

On Thursday, large US banks pumped $30 billion in deposits into First Republic Bank to save it after it was caught up in the crisis caused by the collapse of two other medium-sized US banks last week.

A cautious calm prevailed in all markets on Friday, giving way to a rise in risk-sensitive currencies such as the Australian and New Zealand dollars, which became among the biggest gainers in Asian trading.

The Australian dollar rose 0.4 percent to $0.6684, and its New Zealand counterpart rose 0.3 percent to $0.62145.

The $30 billion rescue package in the US followed Credit Suisse’s announcement earlier Thursday that it would borrow up to $54 billion from the Swiss National Bank (SNB) after the fallout from the collapse of US bank Silicon Valley.

But despite a 30 percent drop in shares of the Swiss lender sparking concerns about the strength of European banks, the European Central Bank went ahead and raised interest rates by 50 basis points at its monetary policy meeting on Thursday.

There was almost no reaction from the euro to the decision, but it managed to gain 0.3 percent on Thursday. And it recorded a rise in the latest transactions by 0.14 percent, to $ 1.0625.

“Should market tensions ease and volatility subside in the coming weeks and months, sustained inflation should, in our view, be sufficient to prompt further tightening.”

On the other hand, the British pound rose 0.15 percent to $1.2128.

The Swiss franc rose 0.1%, after falling earlier in the week by the most in one day against the dollar since 2015.

The Japanese yen remained high, and recorded in the most recent transactions an increase of approximately 0.3 percent, to 133.30 per dollar.

The weak market sentiment has led to dealers flocking to the yen, which is usually considered a safer bet in times of turmoil, amid fears that the recent pressures unfolding among banks in the United States and Europe are just the first phase of a widespread crisis.

Next week’s Federal Reserve monetary policy meeting moves into the spotlight. Some investors hope the bank will slow its campaign of sharp interest rate hikes in an effort to ease pressure on the financial sector.

The dollar index fell 0.12 percent to 104.27.