Title: Dollar Down, Near One Week Low, as Omicron Fears Ease

Nov 29, 2021 11:14PM ET

By: AnalysisWatch

The dollar was just above its one-week low, hit the previous week in Asia on Tuesday morning, as fears eased that the new Omicron COVID-19 variant could derail the US economic recovery and delay interest rate hikes by the Federal Reserve.

The US dollar index, which tracks the greenback against a basket of other currencies, was 0.21% lower at 96.135 at 11:07 PM ET (4:07 AM GMT), above Friday's low of 95.973, when it recorded its steepest one-day drop since May 2021.

The World Health Organization warned of a "very high" risk of waves of infection from Omicron, with some countries already tightening border controls. US President Joe Biden, however, said the US would not introduce new border controls, brightening investor sentiment somewhat.

Meanwhile, Federal Reserve Chairman Jerome Powell still expects inflation to fall in 2022 as supply and demand becomes more balanced. However, he added on Monday that the recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increase uncertainty about inflation.

Increased inflationary pressures could potentially accelerate rate hikes, but the discovery of the Omicron variant initially led investors to reduce their bets on Fed tightening because of the risk to growth.

Continued strength in the US economy will boost the greenback, while the Australian dollar continues to look weak and a break below $0.7106 seems only a matter of time.

The euro was unchanged at $1.12955 after falling to a near-17-month low of $1.1186 as the European Central Bank maintained its dovish stance on inflation.