US Dollar surges as Omicron spreads amid rate hike talks

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The US dollar rose on Friday as traders pulled back from riskier currencies amid discussions about interest rate hikes by central bankers and concerns about the spread of the Omicron variant of SARS-CoV-2.

The US dollar index against major currencies rose 0.66% to 96.67, posting a weekly increase of 0.65% and recovering all the value it lost on Thursday following a streak central bank policy statements.

On Friday, the new Taiwan dollar appreciated against the US dollar, gaining NT $ 0.037 to close at NT $ 27.780, but was down 0.16% from NT $ 27.737 a week earlier.

Photo: Reuters

The euro and pound fell 0.8% and 0.65% respectively, after posting gains the previous two days. The euro closed at US $ 1.1239 and the pound at US $ 1.3236.

Commodity-linked currencies, including the Australian and Canadian dollars, also lost value as crude oil prices fell 2% on concerns that the Omicron variant could dampen demand.

The Australian dollar fell 0.82% to US $ 0.7126, while the Canadian dollar traded down 0.93% to US $ 0.7755, its largest decline since November 26.

The US dollar has remained stable against the Japanese yen.

The risk of reinfection with the Omicron variant is more than five times higher than the Delta variant and has shown no signs of improvement, a new English study has shown.

The results were released as European countries weighed in on new travel and social restrictions.

In the United States, Federal Reserve Governor Chris Waller said an interest rate hike would likely be warranted “soon after” the Fed ended its bond purchases in March.

Traders compare the evolution of interest rates between currencies as central banks go at different speeds to adjust monetary policies in the face of growing signs of persistent high inflation and the Omicron threat.

The spread between US and German two-year government bond yields widened during the day to reach its largest gap in a week and reflected the weakness of the euro .

Some analysts have cautioned against over-reading exchange rate movements at this point. With the central bank meetings on the sidelines, “we believe there will be little informative value in price action in the coming days,” TD Securities strategists said in a note to clients on Thursday.

“The USD may consolidate until the end of the year as the forex markets remove some residual excess positioning / value,” they added.

CNA Supplementary Reports, with Editor-in-Chief

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