The euro stayed ahead of erasing its losses against the dollar after striking a nine-day low on September 30th. These efforts were as a result of the reduced concerns surrounding the health of Deutsche Bank. The calmness Deutsche Bank, a leading German lender, faced also sent a wave of shock that left the Swiss franc and the safe haven Japan’s yen staggering. However, the increased possibility of a rate hike by the Federal Reserve kept the greenback afloat.
The safe havens which are considered to include the franc and the yen seemed to have gained a lot from the worries that faces the biggest lender in Germany. The crisis facing Deutsche Bank is a fine, which the bank continues to dispute, extending up to $14 billion due to the sale of mortgage-related securities. The U.S. listed shares in the bank had last gone up 6.8 per cent but faced a major touch low record on Thursday – slipping more than 8 per cent.
Bloomberg cited an internal document of the bank; that indicated around ten hedge funds that utilise the prime brokerage service of Deutsche bank relocated their derivatives holding that were listed to a different firm in the course of this week. A speculation that the United States Department of Justice will reduce the fine has backed the euro to embark on paring losses after it slipped to $1.1153 at the initial moment of the trading session in the United States.
Numerous concerns that surrounded the Deutsche Bank enabled the dollar to maintain a higher value for nine consecutive days against the franc which stood at 0.9752. Dollar continued to sustain low levels against the Swiss franc after it struck 0.9641 on Thursday; recording the first lowest value since August 26th.
For the last time the dollar had gone up 0.29 percent higher than its counterpart the yen after enjoying high moments of 101.75 yen. The safe haven yen continued to show determination of gaining up to 1.9% in this quarter to hold the record of clinching three consecutive quarterly gains.
The increased feasibility of an interest rate hike by the Federal Reserve helped the dollar from slipping past other major currencies. The dollar index weighing the greenback alongside six major baskets of currencies saw the last little alteration at 95.505. Despite recovering, the euro was still unable to rally due to fears that Deutsche Bank’s unhealthy state could re-emerge. The bank went n to acknowledge that it had painted a bad reputation on Thursday among the investors.
The bank faced a series of pull outs from some of its programs. For instance a large hedge fund from Asia had to remove its collateral from the bank that added up to about $50 million for Tuesday and Wednesday. Additionally, one ‘small firm’ closely monitored the situation but did not pull out. Indeed serious issues faced the Deutsche Bank. The issues had to be corrected in order to have investors consider the firm again.
China’s yuan remained at 6.6689 to its counterpart the dollar. The yuan will officially join hands with the British pound, the euro, the U.S. dollar, and the Japanese yen as the global reserve currency on Saturday, October 1st. The governments have long accused the banks of giving incorrect information to investors regarding the quality and value of their loans. It can be recalled that Deutsche Bank has incurred a loss of about 43% of its total market value in 2016. Its net income has declined to £15 million from €796 million last year.
John Cryan, the chief executive officer of Deutsche Bank, embarked on getting rid of about 9,000 members of staff, reducing risky assets and freezing some dividends.
Earlier in June, the IMF (International Monetary Fund) indicated that among the banks that are the big boys whose impaired financial system can bring it crashing down, Deutsche Bank was the most probable.