Australian, New Zealand dollars on defensive on Omicron fears

[BENGALURU] The Australian and New Zealand dollars was under pressure on Tuesday as the fast-spreading Omicron variant raised fears that more countries may impose economically disruptive restrictions.

The Aussie dipped 0.1 per cent to US$0.71027. That was despite minutes from the Reserve Bank of Australia's (RBA) last policy meeting showing it was optimistic that the variant would not derail the country's economic recovery.

The Omicron variant's surge in Europe has led to more countries imposing tighter curbs, including Britain and the Netherlands.

The kiwi fell 0.2 per cent to US$0.6706, leaving the currency precariously near last week's 2021 trough of US$0.6702. New Zealand will delay its phased border reopening to the end of February from mid-January due to concerns about the variant.

In the United States, the Omicron variant accounts for 73 per cent of infections, according to sequencing data for last week from the Centres for Disease Control and Prevention.

"Acknowledging that we are economists, not epidemiologists, our reading is that news so far is tentatively positive with hospitalisations remaining low even as virus cases have risen sharply," economists NAB wrote in a note.

Minutes from the RBA's December meeting showed while it remained committed to keeping interest rates at a super-low 0.1 per cent, it was considering how and when to wind up its A$4 billion (S$3.9 billion) in weekly bond buying.

In February, the Board will have to decide on whether to extend bond buying to May at the same or reduced amount, or ending it altogether in February.

Last week's strong jobs data, and fourth quarter inflation figures expected in late January will be important guides with many economists predicting bond purchases will end in February if data continues to be strong.

Yields on three-year bonds were up at 0.94 per cent, while 10-years rose to 1.573 per cent.

REUTERS