The U.S. dollar drifted lower against its major rivals on Friday as traders continued to assess the impact of the crisis in the banking sector, and looked ahead to the Federal Reserve’s policy meeting next week.
According to reports First Republic Bank secured a $30 billion lifeline to shore up liquidity. In Switzerland, the Swiss National Bank lent financial support to Credit Suisse.
Meanwhile, traders expect the Fed to raise interest rate by 25 basis points next week.
CME Group’s FedWatch tool currently indicates a 43.2% chance the Fed will leave rates unchanged and a 56.8% chance of a 25 basis point rate hike.
In U.S. economic news, the Fed released a report showing U.S. industrial production was unexpectedly unchanged in the month of February.
The Fed said industrial production was unchanged in February following a revised 0.3 percent increase in January. Economists had expected industrial production to rise by 0.2 percent compared to the unchanged reading originally reported for the previous month.
A separate report from the University of Michigan showed consumer sentiment in the U.S. fell for the first time in four months in March.
The report said the consumer sentiment index slid to 63.4 in March from 67.0 in February. Economists had expected the index to be unchanged.
Surveys of Consumers Director Joanne Hsu noted the decrease was already fully realized prior to the failure of Silicon Valley Bank.
Meanwhile, the report showed decreases in both near-term and long-term inflation expectations, with year-ahead inflation expectations falling to the lowest level since April 2021.
The dollar index dropped to 103.69 before recovering to 103.90, but still remained weak, losing about 0.5% from the previous close.
Against the Euro, the dollar weakened to 1.0662 from 1.0609.
The dollar is weak against Pound Sterling at 1.2171, dropping from 1.2110.
Against the Japanese currency, the dollar weakened to 132.03 yen, losing ground from Thursday’s close of 133.75 yen.
The dollar is weak against the Aussie at 0.6697, and against Swiss franc, it is trading at CHF 0.9271, down from CHF 0.9295.
Against the Loonie, the dollar is slightly stronger, fetching C$1.3738 a unit, after having weakened to C$1.3679 earlier in the day.