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USD: Banking sector risks will dictate currency movements — MUFG

Worsening market conditions will continue to favor the Japanese yen, they say Rabobank analysts. In his opinion, tensions in the banking sector will persist.

Banking risks in the spotlight, but currency movements contained

“Following sustained US dollar selling, we now see signs of a turnaround on fears that the larger-scale problems in the banking sector will rebound. We have singled out the relative resilience of banks in EUR/USD as a support factor for EUR/USD. the eurozone compared to the US, underlined by the outperformance of the euro Stoxx 600 Bank index which is currently unchanged year to date, compared to a fall of more than 20% for the equivalent in the S&P 500 “.

“Given falling global yields as a result of the ongoing banking crisis, the yen remains the most profitable stock, highlighting a resurgence of the yen’s more traditional safe-haven characteristics. We expect this to continue.” .

“If confidence in European banks continues to deteriorate, it seems very likely that the EUR/USD correction will have even more to go. Furthermore, the longer the crisis of confidence continues, the greater the implications for global growth and, therefore the higher beta G10 currencies will also suffer and recent resistance in AUD and NZD could start to ease.”

“The renewed risks to the banking sector evidenced today in Europe underscore the possibility that liquidity problems in the banking sector could transform into credit problems for sectors of the real economy. The worsening background will continue to benefit the yen, which remains the best-performing currency in March. Even if it doesn’t repeat 2008, it may rhyme in many ways.”

Source: Fx Street

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