The US dollar plunged on Tuesday. Why that?

Currency market sentiment improved significantly on Tuesday, sending the US dollar into the red. Investors feared that the collapse of two regional US banks was just the beginning of a global banking crisis. However, these fears eased somewhat today and demand for safe-haven coins weakened as well.

Despite that, the Japanese yen remained high. Japan’s fiscal year ends on Friday and flows are picking up. As a result, the currency continues to rise. The dollar fell to 130.51 yen on Tuesday. It changed hands lower by 0.29% to 131.2 at last. In the previous session, the US dollar soared 0.64% against the Japanese currency before losing some of these gains today.

Economists expect Japanese companies to sell some foreign bonds to boost their balance sheets. Bart Wakabayashi, manager of the State Street branch in Tokyo, noted that at the end of the Japanese fiscal year, it is natural to expect more flows.

In Europe, the pound sterling and the euro rose while the dollar fell. First Citizens BancShares announced that it would buy all the loans and deposits of US lender Silicon Valley Bank. This news rallied investors.

Consequently, the euro jumped 0.27% to $1.083 on Tuesday. The British pound also added 0.31%, changing hands at $1,233 at last. It stayed near a two-month peak. Adam Cole, chief currency strategist at RBC Capital Markets, noted that currency markets are now more risk-positive. Hence the fall of the dollar. Cole thinks that feeling could last a couple of months.

On Tuesday, the US dollar index fell 0.19% to 102.56 after falling 0.26% in the previous session. On the other hand, the risk-sensitive Australian dollar rose. Better-than-expected retail sales data also contributed to the currency’s rally. The Australian dollar finally shot up 0.56% to $0.669.

How are emerging market currencies doing?

Asian currencies and stocks soared today. Malaysia’s ringgit soared to a multi-week high, along with the Indonesian rupiah. However, the Thai baht was the biggest gainer in the region on Tuesday. It jumped 0.5% after falling almost 1% in the previous session.

Additionally, the Philippine peso plunged 0.5%, snapping its three-day winning streak. However, shares in Manila rose insignificantly.

Malaysia’s ringgit rose 0.5%, hitting a five-week high. The Indonesian rupiah gained the same amount, hitting the highest level since early February. Analysts noted that the Malaysian ringgit is gaining more this month compared to the Indonesian rupiah. The collapse of the SVB weighed more heavily on the latter.