By Kevin Buckland
TOKYO (Reuters) – Safe-haven currencies the yen and U.S. dollar recovered from early steep declines and the risk-sensitive Australian and New Zealand dollars flipped to losses as early optimism ebbed over efforts by global authorities to contain a banking crisis.
Japan’s currency, which is particularly sensitive to long-term Treasury yields, rebounded from losses as steep as 0.6% to last be flat against the dollar as the U.S. 10-year yield pared an early decline in Tokyo trading and headed back toward a nearly two-month low.
The Aussie, which at one point had been up by 0.7% to a nearly two-week top of $0.6743, was last 0.2% lower at $0.6683, sliding back below the closely watched $0.67 mark. New Zealand’s kiwi was 0.3% lower at $0.6250, giving up an earlier gain of as much as 0.7%.
Over the weekend, the Federal Reserve, European Central Bank, Bank of England, Swiss National Bank, Bank of Canada and Bank of Japan announced joint action to enhance market liquidity. That followed Swiss authorities’ negotiation of a buyout of Credit Suisse by UBS, but at a huge discount and with a $17 billion debt writedown.
A Fed rate decision on Wednesday adds an additional layer of uncertainty. Traders are still of the view that a quarter point rise is likely but are now positioned for a peak in rates in May at around 4.8%, and then 76 basis points of declines until the end of the year.
“The market’s driving force is risk aversion,” said Takahiro Sekido, chief Japan strategist at MUFG.
“At least within this week, I expect the yen will stay strong overall.”
The yen last traded at 131.79 per dollar, keeping intact a 2.5% gain from last week.
The euro was also about flat at $1.0668 and sterling was little changed at $1.21775, both erasing earlier small gains.
In cryptocurrencies, bitcoin took a breather after its surge to a nine-month high of $28,474 on Sunday, last trading 1.8% weaker at around $27,552.
(Reporting by Kevin Buckland; Editing by Edwina Gibbs)
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