Aussie, pound struggle on Omicron, lockdown fears

London

GLOBAL investors favoured safe-haven currencies over risk-sensitive ones on Monday (Dec 20) on concerns further curbs could be imposed in Europe to contain the Omicron variant, while the US dollar was supported by the US Federal Reserve's hawkish stance.

With last week's slew of major central bank meetings now out of the way, investors turned their focus to the rapid spread of the Omicron variant. The Netherlands went into lockdown on Sunday and local newspapers in Italy reported that new restrictions are being considered there too.

The Australian dollar, which is seen as a liquid proxy for risk appetite, was down 0.5 per cent at US$0.7091, having earlier hit its lowest in 13 days. Britain's pound was down 0.2 per cent at US$1.3205.

A slump in oil prices also hurt commodity-linked currencies.

The Norwegian crown fell, with the euro up around 0.6 per cent versus the crown.

A further hit to market sentiment came from uncertainty over US President Joe Biden's domestic policy bill, known as "Build Back Better". A moderate Democrat who is key to passing the US$1.75 trillion bill said on Sunday he would not support the package, citing concerns about inflation.

Goldman Sachs cut its US growth forecasts and the US 10-year Treasury yield fell to its lowest since Dec 6 on Monday.

The US dollar index was at 96.598 at 4.20 pm Monday, Singpore time, not far from last month's peak of 96.938, which was the highest since July 2020.

Speculators' net long bets on the US dollar, or bets that the US dollar will rise, edged higher in the week to Dec 14, reflecting a growing desire among market participants to hold the greenback.

Elsewhere, the euro was up 0.2 per cent at US$1.12575, only partly recovering after tumbling 0.8 per cent on Friday after the European Central Bank took tentative steps to exit its pandemic-era stimulus.

China cut its lending benchmark rate for the first time in 20 months to prop up its slowing economy, sending the yuan to a 10-day low.

Meanwhile, cryptocurrencies Bitcoin and Ether were on track for their second consecutive day of declines. Bitcoin was around US$46,478.09, having fallen far below the all-time high of US$69,000 it reached in November. REUTERS