By Peter Nurse
Investing.com – The dollar retreated Tuesday as fresh concerns about the impact of the omicron coronavirus variant prompted a rush into the safe havens, the Japanese yen and the Swiss franc.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower at 95.965, at a fresh one-week low.
In prepared testimony ahead of his appearance later in the Senate Banking Committee, Federal Reserve Chair Jerome Powell said the omicron variant of the coronavirus poses risks to both sides of the central bank’s mandate to achieve stable prices and maximum employment.
“The recent rise in COVID-19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said in prepared testimony released Monday. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”
Powell will likely flesh these comments out later alongside Treasury chief Janet Yellen.
Elsewhere, EUR/USD rose 0.3% to 1.1328, GBP/USD climbed 0.1% to 1.3323, off Friday’s 11-month low of 1.3278, while the risk-sensitive AUD/USD fell 0.3% to 0.7118, just above a 12-month low, and the NZD/USD dropped 0.2% to 0.6807.
This sudden burst of risk aversion followed comments from the head of drugmaker Moderna (NASDAQ:MRNA), one of the pharmaceutical companies supplying most of the developed world with vaccines to combat the Covid-19 virus, which raised concerns that the omicron variant could cause more widespread global economic disruption.
Stephane Bancel told the Financial Times that the existing vaccines would struggle to cope with the omicron variant, predicting a ‘material drop’ in their effectiveness.
The World Health Organization has warned of a “very high” risk of infection surges from the new variant, and countries around the world have reacted quickly to tighten border controls.
President Joe Biden had boosted sentiment on Monday by stating that the United States would not reinstate lockdowns, even in the face of the uncertainty surrounding the omicron variant.
Also of interest Tuesday will be the release of the Eurozone CPI number for November, which is expected to climb to 4.5% on the year from 4.1% the previous month.
Elsewhere, USD/CNY fell 0.2% to 6.3723 after China recorded surprise growth in factory activity in November, the first in three months, as its manufacturing purchasing managers index came in at 50.1, higher than the previous month’s 49.2 figure.
The non-manufacturing PMI was at 52.3, higher than the previous month’s 52.4 figure.
Dollar Weakens; Yen, Swiss Franc Favored as Omicron Fears Rise
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