FOREX-Dollar collapses as economic optimism undermines demand for safe-haven assets

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The safe haven dollar languished near a nearly a week’s low against its major peers on Thursday as investors took a more optimistic stance on the global economic outlook, despite the rapid spread of the Omicron coronavirus variant.

The dollar index, which measures the currency against six rivals, slipped 0.08% to 96.032 and hit 96.018 for the first time since December 17. The risk-sensitive Australian dollar was flat at $ 0.72165 after rising 0.86% on Wednesday.

The British pound was little changed at $ 1.3352 after rallying 0.63%. Risk appetite has improved since Monday, when markets were rocked by government restrictions related to the spread of Omicron.

However, Wednesday’s data showed US consumer confidence improving more than expected in December, suggesting the economy will continue to grow in 2022 despite a resurgence in COVID-19 infections and a reduction in stimulus spending. . There was also encouraging news from a South African study, which suggested reduced risks of hospitalization and serious illness in people infected with Omicron compared to the Delta strain.

The euro rose 0.12% to $ 1.13395, adding to a 0.33% advance overnight. The dollar was little changed at 114.17 yen – another safe haven currency – holding near a nearly one-month high since Wednesday at 114.37.

Many analysts expect the dollar to strengthen in the coming months after a hawkish tilt this month at the Federal Reserve put an interest rate hike in March on the table, distinguishing the bank Central America from its more accommodating peers in Europe, Japan, Australia and elsewhere. Money markets are evaluating better than the 50-50 odds for an increase by the March policy meeting.

“With the recent Fed speech indicating that March is online, we continue to believe that the risk / reward ratio is favorable to respecting this result and therefore supporting the strength of the US dollar in the new year,” TD Securities strategists wrote in a report. “The continued strength of the data should help bolster Fed pricing, especially amid reports that Omicron appears to be leading to fewer hospitalizations,” they said.

In the near term, however, the dollar is expected to consolidate in a range of $ 1.12 to $ 1.14 against the euro, they said.

(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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