Dollar jumps as traders retreat amid rate-hike talk, Omicron fear

By David Henry

NEW YORK (Reuters) - The dollar rose on Friday 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%, 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% and 0.6%, respectively, after having booked gains the two previous days. The euro stood at $1.1239 and the pound at $1.3236 at 2100 GMT.

Commodity-linked currencies, including the Australian and Canadian dollars, also lost value as crude oil prices fell 2% on worries that Omicron variant will dampen demand.

 

The Aussie fell 0.8% to $0.7124.

The Canadian dollar traded 1% lower at 1.2895, or 77.54 U.S. 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 five times higher than the Delta variant and has shown no sign of being milder, a new study from England showed. The findings were released as European countries weigh further travel and social restrictions.

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.

Earlier, New York Fed president John Williams told CNBC that the Fed will gain "optionality" to raise interest rates in 2022 by ending bond purchases by March.

Traders are comparing changing interest rates across currencies as central banks go at different speeds to adjust monetary policies in the face increasing signs of persistently high inflation and the Omicron threat.

The spread between yields on two-year government securities of the United States and Germany widened through the day to its biggest gap in a week and reflected the euro's weakness.

Some analysts have cautioned against reading too much into changes in exchange rates at this stage.

With the central bank meetings out of the way, "we think there will be little informational value in price action in coming days," strategists at TD Securities said in a note to clients on Thursday.

"The USD can consolidate into year-end as FX markets work off some residual positioning/value excesses," they added.

The dollar index, at 96.6590, was up about 8% since May.

Among cryptocurrencies, bitcoin fell 3% to $46,335.

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Currency bid prices at 4:00PM (2100 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

96.6590 95.9770 +0.72% 7.422% +96.6840 +95.8750

 

Euro/Dollar

$1.1239 $1.1331 -0.80% -8.00% +$1.1349 +$1.1237

 

Dollar/Yen

113.7500 113.7100 +0.04% +10.09% +113.8550 +113.1450

 

Euro/Yen

127.84 128.82 -0.76% +0.72% +128.9700 +127.8200

 

Dollar/Swiss

0.9244 0.9194 +0.55% +4.49% +0.9245 +0.9175

 

Sterling/Dollar

$1.3236 $1.3323 -0.65% -3.12% +$1.3339 +$1.3235

 

Dollar/Canadian

1.2895 1.2772 +0.97% +1.28% +1.2895 +1.2773

 

Aussie/Dollar

$0.7124 $0.7183 -0.81% -7.38% +$0.7183 +$0.7123

 

Euro/Swiss

1.0389 1.0413 -0.23% -3.87% +1.0420 +1.0386

 

Euro/Sterling

0.8489 0.8501 -0.14% -5.01% +0.8528 +0.8489

 

NZ

Dollar/Dollar $0.6732 $0.6802 -1.00% -6.23% +$0.6801 +$0.6732

 

Dollar/Norway

9.0400 9.0045 +0.36% +5.23% +9.0420 +8.9700

 

Euro/Norway

10.1618 10.1801 -0.18% -2.92% +10.2108 +10.1390

 

Dollar/Sweden

9.1397 9.0371 +0.36% +11.51% +9.1432 +9.0182

 

Euro/Sweden

10.2728 10.2363 +0.36% +1.95% +10.2903 +10.2256

 

 

(Reporting by David Henry in New York.; Editing by Frances Kerry and Sonya Hepinstall)