Hi everyone! It’s me, Kate Stikhina. You are watching a recap of the Asian session. Concerns over the banking sector in Europe and the US have eased. Thus, sentiment in stock markets improved again.
Australian and New Zealand shares scored modest gains. Japanese ones, on the contrary, rose sharply, offsetting half of their early losses.
For the banking sector, monetary tightening turned out to be a real disaster. While traders are anxiously tracking inflation and labor market reports mulling over the Fed’s next steps, banks are facing a liquidity crisis.
US financial corporations related to the IT sector, the fast-growing and the most volatile one, are bearing the brunt. The collapse of Silicon Valley, Signature, and Silvergate Bank took place at the end of last week. However, its repercussions swept across other countries, affecting Credit Suisse and some other European banks.
Despite the woes in the US financial sector, this event has not undermined the credibility of the Fed and the US economy. This is confirmed by the number of traders betting on a new rate increase by a quarter point. According to the FedWatch Tool, today nearly 80% of investors are pricing in such a likelihood.
Nevertheless, the risk of new bank runs still persists. The banking sector may face a broader crisis. The intervention of the Fed, the Treasury Department, and the SEC should have mitigated the crisis and calmed depositors.
However, regulators pledged to save and return all the money to depositors in the event of a crisis. This comment prompted many investors to transfer their money back to those banks. It delivered a severe blow to small and medium-sized banks. Yesterday, big US banks adopted emergency measures to shore up confidence in the banking system.
A group of 11 largest financial institutions has agreed to deposit $30 billion in First Republic Bank. In a joint statement, they said that regional, medium and small banks ensure the stability of the financial system. The $30 billion infusion will help the struggling San Francisco lender cash to meet customer withdrawals.
Following the news about financial aid to First Republic Bank, the US dollar dipped to 104 versus its main rivals. US government bonds also halted their growth near their key support levels.
After yesterday's panic triggered by headwinds in the banking sector, we are now witnessing outflow from safe haven assets to risk ones. The US dollar index was trading in the downward range of 103.9-104.4. Yet, a rescue package adopted by 11 US banks may signal mounting problems akin to the financial crisis of 2008.
Back then, everything started with the demise of Lehman Brothers. Other US multinational banks such as Bear Stearns, Merrill Lynch, Goldman Sachs, and Morgan Stanley as well as leading mortgage companies Fannie Mae, Freddie Mac, and AIG could have faced the same fate.
The 2008 crisis arose due to the bountiful issuance of sub-prime mortgages. They formed a bubble, which eventually burst.
Huge stimulus measures taken by the government to facilitate the economy in 2020– 2022 may also have unpleasant consequences. Therefore, the US dollar may regain momentum. Its trajectory will be determined by the results of the Fed meeting on March 22.
The yen as a safe haven asset also dropped due to improved risk sentiment. However, it usually asserts strength amid the weakness of the US dollar and falling US government bonds.
The greenback and Treasuries declined in the Asian session. Hence, the dollar/yen pair managed to approach 133.2. The bulls are still in control. They are opening long positions in the range of 132.7-133.8.
The yen was also bolstered by the speech of the Japanese Minister of Finance. As usual, Shunichi Suzuki made cautious statements. He said that he was closely monitoring financial markets in and outside of Japan and for any impact from problems in the banking sector in the West on the Japanese economy.

00:00 Introduction
00:28 U.S. liquidity shortages
01:38 US medium and small bank bailout package
02:08 CME FedWatch tool on FOMC rate
02:52 USDX
03:34 Recalling the 2008 crisis
04:31 USD/JPY
05:03 Shunichi Suzuki support for the yen
05:29 Jim Chalmers on Australian bank capitalisation
05:46 AUD/USD
06:28 NZD/USD
07:01 Results

https://www.instaforex.com

FX Analytics - https://www.instaforex.com/forex_analytics
Forex Calendar - https://www.instaforex.com/forex_calendar
Forex TV from InstaForex - https://www.instaforex.com/instaforex_tv

Forex charts - https://www.instaforex.com/charts
Instant account opening - https://www.instaforex.com/fast_open_live_account
Forex Trading Contests - https://www.instaforex.com/forex_contests

List of official InstaForex blogs:
https://www.facebook.com/instaforex
https://www.instagram.com/instaforex/
https://twitter.com/InstaForex

#forex_news # asian_session #instaforex_tv