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The dollar regained some ground on Tuesday but was pinned near a five-week low as traders tiptoed back into riskier assets after UBS’ state-backed takeover of Credit Suisse allayed some fears of a widespread, systemic banking crisis.
Market sentiment remained fragile, however, as investors struggled to determine the scale of the ramifications from a sector hit that began with Silicon Valley Bank’s collapse, putting a cap on risk appetite and giving some support to the safe haven dollar.
Sterling rose 0.02 percent to $1.2280, while the euro steadied at $1.0722.
The Aussie fell 0.22 percent to $0.6703.
News of UBS’ planned takeover of rival Credit Suisse on Sunday – a shotgun merger engineered by Swiss authorities – gave way to a small risk-on rally on Monday, as worries over market-shaking turmoil across global banks waned.
Switzerland’s secretive Credit Suisse rescue rocks global finance
“Markets remain nervous, but the rapidity of policymakers’ response to the evolving banking sector risks is heartening,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
