Risk appetite sends Japanese yen to one-month low

London

THE euro fell in thin holiday trading on Wednesday (Dec 29) and the dollar sent the safe-haven yen to a one-month low, as investors looked past surging cases of Omicron in another bout of risk appetite.

Risk-sensitive currencies such as the Australian dollar were higher as stocks motored upwards but the euro bucked the trend and weakened 0.1 per cent to US$1.1298, while the dollar index added 0.1 per cent to 96.246.

With many traders having taken time off for Christmas or the end of the year, analysts said it was hard to read too much into the moves. The main driver currently was continued optimism that Omicron would not derail economic momentum.

The dollar rose versus the safe-haven yen, gaining as much as 0.2 per cent to 115.04, its strongest since late November.

While the yen has been battered by the strength of investors' risk appetite, analysts said end-of-quarter investor flows were also impacting the currency.

Sterling dipped 0.1 per cent to US$1.3420 while it gained 0.1 per cent versus the euro to 84.14 pence.

Elsewhere, Turkey's lira dropped more than 5 per cent to around 12.45 per dollar, eating further into the huge gains made recently, as worries persisted over soaring inflation and unorthodox monetary policy.

Investor sentiment has been buoyed in recent days by signs that the Omicron variant, while causing a jump in cases to record highs in many countries, is not leading to new, widespread lockdowns.

US health authorities on Monday shortened the recommended isolation time for Americans with asymptomatic cases of Covid-19 to 5 days from the previous guidance of 10.

The dollar was also supported by a rise in 2-year Treasury yields which hit 0.758 per cent on Tuesday, a near 2-year high, before slipping to 0.748 per cent in European trading hours on Wednesday.

Kyle Rodda, an analyst at IG Markets, said longer term he was bullish on the US dollar due to approaching rate hikes by the Federal Reserve and the apparent reduced chance of future lockdowns in the US. REUTERS