The dollar has experienced a downturn, with risk sentiment improving as authorities and banks attempt to alleviate pressure on the financial system in key markets.
Major US banks pumped $30 billion in deposits into First Republic Bank on Thursday, rescuing the lender from a deepening crisis precipitated by the failure of two other mid-sized US banks in the last week.
After Credit Suisse’s (CSGN.S) statement earlier on Thursday that it would borrow up to $54 billion from the Swiss National Bank, the US Treasury, Federal Reserve, and banks put together a $30 billion rescue package.
It had become equally entangled in worldwide contagion following the collapse of Silicon Valley Bank in the United States (SVB).
The European Central Bank (ECB) nevertheless proceeded with a hefty 50-basis-point rate hike at its Thursday policy meeting, despite concerns about the health of Europe’s banks sparked by a 30% drop in the shares of a troubled Swiss bank.
ECB policymakers attempted to reassure investors that euro zone banks were resilient and that the transition to higher interest rates would, if anything, strengthen their margins.
The euro’s response to the decision was rather subdued, but it managed a 0.3% increase on Thursday. Last, it was 0.14 percent higher at $1.0625.
Sterling increased by 0.15 percent to $1.2128, while the Swiss franc advanced by 0.1%. Earlier in the week, the Swiss franc fell against the dollar by the highest in a single day since 2015.
The Japanese yen stayed rising and was last valued at 133.30 per dollar, an increase of nearly 0.3%.