Dollar Falls Post Silicon Valley Bank Collapse

The US dollar fell on Monday as authorities stepped in to limit the fallout from Silicon Valley Bank's sudden collapse, with investors hoping the Federal Reserve will take a less aggressive monetary path.

The US government announced several measures early Monday Asian time, and all SVB customers will have access to their deposits beginning Monday. Officials also stated that depositors of New York's Signature Bank, which was closed down by the state financial regulator on Sunday, would be made whole at no cost to the taxpayer.

The dollar index, which measures the U.S. currency against six rivals, fell 0.153 per cent at 104.080. The Japanese yen strengthened 0.34 per cent to 134.52 per dollar, the highest in a month as investors made a move to safe-haven Asian currencies.

"The currency market is still digesting all the news related to the collapse of SVB," said Carol Kong, currency strategist at Commonwealth Bank Of Australia.

"Given all the measures taken by the authorities the market should be calmer at least for the time being, but if there are concerns about regional banks, we could easily see the dollar and Japanese yen rally again."

The euro rose 0.44 percent to $1.069, while sterling closed at $1.2085, up 0.47 percent on the day.

The Australian dollar gained 0.79 percent to $0.663, while the New Zealand dollar gained 0.36 percent to $0.616.

Bitcoin last rose 11.12% to $22,330.00 in cryptocurrencies. Ethereum last increased 12.12% to $1,598.90.

With the spotlight firmly on Tuesday's inflation data, investors speculated that the Fed would now be hesitant to upset the apple cart by raising interest rates by a whopping 50 basis points this month.

"From the perspective of the FOMC, their concern is still inflation and inflation has not really decelerated," Kong said, adding that tomorrow's CPI will continue to show that inflation remains persistently high.

"Given what's happened in the U.S. financial system, a 25 basis point hike is more likely than a 50 basis point hike."

Fed fund futures surged in early trading, implying only a 17% chance of a half-point hike, down from around 70% before the SVB news broke last week.