Australian, New Zealand dollars hold near recent lows amid Omicron uncertainty

[SYDNEY] The Australian and New Zealand dollars drifted against the greenback on Tuesday, hovering around recent lows as markets assessed the severity of the Omicron coronavirus variant on the world economy.

The Australian dollar was steady at US$0.7143 at 0441 GMT, after hitting a three-month trough of US$0.7115 late last week as countries began to restrict travel from southern Africa, where the virus was first reported.

The New Zealand dollar was slightly higher at US$0.6827, after slipping to a one-year low of US$0.6788 on Friday.

"(The Omicron variant) has injected a considerable degree of uncertainty with a need for patience as the scientific and health community assess its severity, the effectiveness of current vaccines, and the time frame for the production and distribution of new Omicron-specific vaccines if needed," RBC Capital strategists told clients in a note.

"Early signs on transmissibility and mutations argue for caution."

Australian authorities said on Tuesday that an international traveller who was most likely infected with the Omicron variant had spent time in a busy shopping centre in Sydney. If confirmed, it would be the 6th known person infected with the new variant in the country.

Shares in Asia were higher on Tuesday as hopes grew that the variant might prove to be milder than initially feared, while strong regional economic data also helped underpin the risk-sensitive antipodean currencies, strategists said.

China's factory activity unexpectedly picked up in November, growing for the first time in three months as a crippling surge in raw material prices and power rationing eased.

In Australia, strong exports and government stimulus spending in the third quarter boosted economic output, official data showed on Tuesday.

Bond markets were slightly stronger, sending Australian 3-year yields 3 basis points lower to 0.90 per cent, while 10-year yields fell two basis points to 1.74 per cent.

New Zealand yields were two and a half basis points lower across the curve.

REUTERS