US dollar jumps as Omicron spreads amid rate-hike talk

New York

THE dollar rose on Friday (Dec 17) as traders retreated from riskier currencies amid talk of interest rate hikes by central bankers and concerns about the spread of Omicron cases.

The dollar index against major currencies rose 0.7 per cent, recouping all of the value it had lost on Thursday following a series of central bank policy statements.

The euro and British pound fell 0.8 per cent and 0.6 per cent, respectively, after having booked gains the 2 previous days. The euro stood at US$1.1239 and the pound at US$1.3236 at 2100 GMT.

Commodity-linked currencies, including the Australian and Canadian dollars, also lost value as crude oil prices fell 2 per cent on worries that Omicron will dampen demand. The Aussie fell 0.8 per cent to US$0.7124. The Canadian dollar traded 1 per cent lower at 1.2895, or 77.54 US cents, in its biggest decline since Nov 26.

The dollar was flat against the Japanese yen.

The risk of reinfection with the Omicron coronavirus variant is more than 5 times higher than the Delta variant and has shown no sign of being milder, a new study from England showed.

In the United States, Federal Reserve governor Chris Waller said an interest rate increase will likely be warranted "shortly after" the Fed ends its bond purchases in March.

Traders are comparing changing interest rates across currencies as central banks go at different speeds to adjust monetary policies in the face of increasing signs of persistently high inflation and the Omicron threat. The spread between yields on 2-year government securities of the US and Germany widened through the day to its biggest gap in a week and reflected the euro's weakness.

The dollar index, at 96.6590, was up about 8 per cent since May. REUTERS