The euro erased on Friday losses against the dollar after hitting a nine-day low on reduced concerns surrounding Deutsche Bank’s health, while the greater calm over Germany’s biggest lender also pressured the safe-haven yen and Swiss franc.
Deutsche Bank’s U.S.-listed shares were last up about 6 percent after touching record lows on Thursday. The immediate cause of the Deutsche crisis is a fine, disputed by the bank, of up to $14 billion by the U.S. Department of Justice over its sale of mortgage-backed securities.
Speculation that the fine would be reduced helped the euro pare losses after the currency fell to $1.1153 around the start of the U.S. trading session. Soothed concerns surrounding Deutsche Bank also helped the dollar hit a nine-day high against the safe-haven franc of 0.9752.
“There seems to be reduced pessimism at least for the outlook for Deutsche,” said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto. He said the euro was finding strong demand between $1.1150 and $1.1160.
The dollar was last up 0.37 percent against the yen at 101.38 yen after hitting a session high of 101.75 yen.
“Risk appetite is certainly more constructive now,” Osborne said.
The Japanese currency still looked set to gain about 1.9 percent against the dollar for the quarter to clinch its third straight quarterly gain.
The dollar index, which measures the greenback against a basket of six major currencies, was last little changed at 95.505.
While the euro recovered, it was still failing to rally partly on fears that Deutsche Bank’s woes could resurface. The bank admitted it had an image problem with investors on Thursday.
One large hedge fund in Asia had pulled out its collateral from Deutsche amounting to $50 million in the last two days, while another fund with a “smallish amount” with the bank was monitoring the situation closely and had not pulled out, people familiar with the matter told Reuters on Friday.
“Deutsche Bank has serious issues,” said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.
China’s yuan was steady at 6.6689 to the dollar. The currency will formally join the U.S. dollar, the euro, the Japanese yen and the British pound as a global reserve currency on Saturday.