US dollar eases, Aussie rises to one-week high

London

THE US dollar retreated for the second straight day on Wednesday (Dec 8) while the Australian dollar and euro inched higher, as reports of imminent Covid curbs in Britain failed to dent a conviction the Omicron variant would not derail global economic recovery.

The Australian dollar hit a one-week high, China's yuan jumped to its highest since May 2018 versus the US dollar in offshore trade, while world stocks were generally higher.

Media reports that Britain was on the point of bringing in more Covid-linked restrictions pushed the pound and UK stocks lower but the impact was yet to be felt significantly in offshore markets.

The US dollar index, which measures the greenback against 6 major peers, slipped 0.10 per cent to 96.20, while the euro climbed 0.2 per cent to US$1.1289.

"Attention in FX markets returns to the central bankers and how they plan to manage the growth versus inflation trade-off," ING analysts said, pointing to central bank meetings in Canada, Poland and Brazil, while the US Federal Reserve meets next week.

The Aussie rose as high as US$0.7142 and 81.07 yen, levels not seen since Dec 1.

News on the Omicron front had been broadly positive earlier, with British drugmaker GSK saying its antibody-based Covid-19 therapy with US partner Vir Biotechnology was effective against all mutations of the new coronavirus variant.

The Reserve Bank of Australia also said Omicron was not expected to stall the country's economic recovery.

Investors had already cheered comments from the weekend that cases in South Africa - where the Omicron strain was first identified - showed milder symptoms.

For the week, Australia's currency is up 1.84 per cent against the greenback, setting up its best performance in three months.

The Chinese yuan hit the highest since May 2018 against the US dollar in offshore trading, strengthening as far as 6.3440.

The Canadian dollar marked a 2-week high at US$1.26325 per greenback, hours before a Bank of Canada policy meeting.

Economists expect no change at that meeting but forecast rate hikes as early as the middle of next year. REUTERS