Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. Dollar out of favour as Omicron leaves currency markets unseasonably volatile

Published 2021-12-21, 07:57 p/m
Updated 2021-12-21, 08:01 p/m
© Reuters. FILE PHOTO: A money changer counts U.S. dollar banknotes at a currency exchange office in Ankara, Turkey November 11, 2021. REUTERS/Cagla Gurdogan

© Reuters. FILE PHOTO: A money changer counts U.S. dollar banknotes at a currency exchange office in Ankara, Turkey November 11, 2021. REUTERS/Cagla Gurdogan

By Alun John

HONG KONG (Reuters) - The dollar edged down again in early Asia on Wednesday, starting a third successive session under pressure as investors favoured riskier currencies and asset classes.

The New Zealand dollar rose 0.8% on Tuesday, its best day since October, recovering from near a year low to last trade at $0.6757, and the pound gained 0.46% - its best day in a month - last trading at $1.3267.

With the dollar also gaining 0.44% on the safe haven yen, Tuesday's currency moves were in keeping with advances in oil and a 1.6% gain in MSCI's gauge of stocks across the globe. [MKTS/GLOB]

The result was the dollar index, which measures the currency against major peers, was last at 96.441 down from as high as 96.994 last week when it was testing a 16 month high.

Market players struggled to point to a clear reason for the "risk on" mood, saying markets were struggling to assess the consequences of the Omicron variant of COVID-19, leading to unseasonable volatility.

Stocks sold off sharply on Monday and the dollar index had gained 0.7% on Friday.

While the weeks either side of Christmas are typically low in volatility for currencies and other asset classes, analysts at ING said, "This year some seasonal tendencies will be mixed with the Omicron variant threatening to force new restrictions and markets still processing a week full of key central bank decisions."

Last week Britain became the first G7 economy to raise interest rates since the onset of the pandemic, with the U.S. Federal Reserve also signalling plans to tighten in 2022 but the European Central Bank only slightly reining in stimulus.

Omicron infections are multiplying across Europe, the United States and Asia, causing countries across the globe to consider new curbs on movement and reimpose quarantine periods for incoming visitors.

But a Bloomberg report that the U.S. Food and Drug Administration is set to authorise COVID-19 treatment pills from both Pfizer Inc (NYSE:PFE) and Merck as early as Wednesday may have helped the mood.

The euro was last at $1.1289 starting Wednesday up marginally, which would be its third successive session of gains.

© Reuters. FILE PHOTO: A money changer counts U.S. dollar banknotes at a currency exchange office in Ankara, Turkey November 11, 2021. REUTERS/Cagla Gurdogan

In emerging market currencies, traders were bracing for another day of volatility for Turkey's lira, which closed up 6% on Tuesday, having been down as much as 8.6% and up as much as 18.5%.

Bitcoin was largely steady just below $49,000 after a 4% gain on Tuesday. Ether, the world's second-largest cryptocurrency, has also been gaining this week and was last just above $4,000.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.