The US Dollar was pressured on Monday due to UBS' cut-price forced merger of its beleaguered rival Credit Suisse. The banks came together on an agreement and price tag of 3 billion Swiss francs ($3.23 billion) and assume up to $5.4 billion in losses in a takeover engineered by Swiss authorities.
The US Dollar index, DXY, which weighs the greenback vs. a basket of currencies was touching its lowest level since Feb. 15 at 103.27. However, there are still concerns over regional US banks. First Republic shares tumbled as much as 50% on Monday and were last down about 39%. Additionally, the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, and the Swiss National Bank are taking coordinated action to enhance the provision of liquidity via standing US Dollar liquidity swap line arrangements.
Meanwhile, the Federal Reserve's latest decision on interest rate hikes is due on Wednesday and adds an additional layer of uncertainty for investors. Rates currently stand at 4.5% to 4.75%.
Analysts at TD Securities explained that they ´´expect a 25bp rate hike at next week's FOMC meeting, taking the Fed Funds rate to 4.75%-5.00%. Post-meeting communication is likely to emphasize that the Fed is not done yet in terms of tightening (also reflected in a slightly more hawkish dot plot), with officials also flagging the more uncertain economic environment, resulting in an even larger emphasis on data dependence.´´
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