Asia FX rattled by bank crisis fears, safe havens advance By

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By Ambar Warrick — Most Asian currencies kept to a tight range on Thursday amid renewed concerns over a U.S. and European banking crisis, with investors largely pivoting into safe haven currencies amid fears of broader economic headwinds. 

The was among the best performers for the day, rising 0.5% and sticking close to its strongest level in a month, while the , which is generally seen as a safer investment among risk-heavy Southeast Asian currencies, advanced 0.4%. 

The was flat after Goldman Sachs) hiked its outlook for Chinese economic growth in 2023 to 6% from 5.5%. The forecast, which is more than the 5% posited by the Chinese government, helped spur some optimism over a Chinese economic recovery, as the country reemerges from three years of COVID lockdowns. 

Still, weak risk appetite saw the yuan creep back toward the key 7 level against the dollar. 

Fears of a potential banking crisis came back to the fore on Wednesday following a rout in the shares of beleaguered Swiss lender Credit Suisse Group AG (SIX:). But the lender secured a $54 billion credit line from the Swiss National Bank, soothing some concerns over an immediate collapse in the banking sector. 

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But this offered little relief to Asian currencies, as investors pivoted out of risk-heavy assets. Most regional currencies were muted on Thursday, while the led losses in the region with a 0.6% tumble.

The dollar fell slightly against a basket of currencies, but was sitting on strong overnight gains. The and both fell 0.1% after rallying 1% in overnight trade. 

The greenback was largely buoyed by safe haven demand, and also saw bids amid increased uncertainty over the path of U.S. monetary policy. Focus is now squarely on a next week, where the bank is expected to hike interest rates by 25 basis points.

But fears of a brewing bank crisis, after the collapse of three regional U.S. banks, saw traders question whether the Fed will have enough economic headroom to keep raising . This caused sharp losses in the dollar earlier this week, offering some relief to Asian currencies. 

Focus was also on an upcoming interest rate decision by the , which is expected to raise rates by 50 basis points later in the day. The rose 0.3% in Asian trade.

The was among the few outliers for the day, rising 0.4% as stronger-than-expected pushed up expectations of more interest rate hikes by the Reserve Bank.

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