The U.S. dollar steadied on Thursday after strong U.S. banking results firmed up expectations that the Federal Reserve will keep monetary policy tight for a while longer.
Morgan Stanley (MS.N) reported first quarter profit on Wednesday that beat expectations, adding to rosy results from major U.S. lenders that have calmed fears of a widening crisis after the failure of Silicon Valley Bank and Signature Bank last month.
The dollar index , which tracks the currency against a basket of its peers, edged 0.07% lower to 101.92 after sliding on Friday to its lowest level since early February.
“The banking results continue to show that the U.S. bank funding situation is stabilizing,” said Bank of Singapore currency strategist Sim Moh Siong.
“So that’s helping the dollar, plus the fact that we have slightly hawkish Fed speak, the market is starting to price out the extent of a Fed cut for this year.”
Fed Bank of New York President John Williams said on Wednesday that inflation was still at problematic levels and the U.S. central bank would act to lower it.
The U.S. central bank will deliver a final 25-basis-point interest rate increase in May and then hold rates steady for the rest of 2023, according to economists in a Reuters poll.
HOT INFLATION
Elsewhere, the kiwi slid 0.5% to $0.6169 after touching the weakest level since March 16 on data showing New Zealand’s consumer price index (CPI) for the first quarter came in below expectations, but remained near historic highs.
That followed hotter than expected CPI figures in Britain that boosted bets for a rate increase from the Bank of England in May.
Sterling was flat at $1.2443, but not too far from a 10-month high of $1.2545 touched on Friday.
The Aussie dollar was flat at $0.6717 after a review of the Reserve Bank of Australia (RBA) released on Thursday outlined a range of reforms, including a more focused monetary policy mandate.
The Japanese yen lost 0.1% to 134.82, after trading above 135 to the dollar for the first time in a month on Wednesday.
Traders are anticipating further cues from U.S. manufacturing data on Friday, the Bank of Japan’s meeting next week, and the Fed’s Open Market Committee (FOMC) early next month, Bank of Singapore’s Sim said.
