Reassuring Omicron news lifts US dollar, bond yields

London

THE US dollar rose on Monday (Dec 6) against safe-haven currencies such as the yen and Swiss franc after some reassuring news on the Omicron Covid variant, while units like the Australian dollar that have been battered by growth worries also caught a bid.

US Treasury yields rose and stocks gained after news that initial observations suggested Omicron patients had only mild symptoms, reversing some of Friday's heavy sell-off.

Friday had taken 10-year Treasury yields below 1.4 per cent for the first time since late September and boosted the safe-haven yen and Swiss franc. The dollar had tumbled as much as 0.4 per cent against the Japanese currency.

Friday's greenback losses had also followed a below-forecast jobs report, though the data did little to shake market expectations that the Federal Reserve will accelerate the pace of unwinding stimulus and raise interest rates, starting next year.

By 1100 GMT, the dollar was flat against a basket of currencies around 96.19, but within range of November's 16-month peak of 96.938. It was 0.4 per cent higher against the yen at 113.35 yen and rebounded by a similar amount against the franc.

Dollar long positions climbed for a second straight week to the highest since June 2019, data from the US Commodity Futures Trading Commission showed on Friday, while bearish euro positions rose to stand at the highest since March 2020.

The euro slipped marginally to the dollar to around US$1.130.

Meanwhile, the Australian dollar rose as much as 0.5 per cent to US$0.704, scraping itself off a 13-month low. The Norwegian krone, which also plumbed 13-month lows on Friday, strengthened 0.3 per cent.

Such currencies were also supported by a slight re-steepening of the Treasury yield curve, where the gap between 2 and 10-year yields touched the narrowest in a year on Friday.

Elsewhere, cryptocurrencies nursed big losses from a wild weekend that at one stage crushed Bitcoin by more than 20 per cent. Bitcoin slipped 4 per cent to around US$45,500 on Monday. REUTERS