Kevin Buckland

(Reuters] – On Tuesday, the dollar hovered above its one-week-low against major peers. This was due to fears that Omicron virus variant Omicron Coronavirus might slow the U.S. recovery.

Half a percentage of the safe-haven Japanese yen was off Monday’s highest level since Nov. 11. A third of a % fell in the euro against Monday’s 1-week high.

From a three-month high, the risk-sensitive Australian Dollar fell 0.4%.

Traders found comfort in President Joe Biden’s assurances that the United States wouldn’t reinstate lockdowns and a South African doctor’s remarks that the new strain has milder symptoms.

Jerome Powell, Fed Chair, stated that Omicron may cause inflation pressures in the future to persist longer.

This could potentially accelerate the need to raise rates, while traders originally reacted to Omicron’s discovery by putting off Fed tightening due to the potential risk to growth.

The money markets are currently predicting a strong chance of an increase in the rate of interest starting July. However, it is still not completely priced until September.

In the meantime, Omicron was warned by the World Health Organization, and Omicron-related infections have been reported in several countries. Countries across the globe quickly increased border security to counter this.

Omicron’s less severe assessment has allowed for the ()To clawback some of the decline”, but “the slightly underwhelming bounce on global markets suggests that there remains a raised level of concern regarding Omicron variant,” Westpac strategists said in a note.

The strategists expect that the U.S. will continue to be strong, which will boost the greenback. However, it continues to look weak, and breaking below $0.7106 “just seems like a matter-of-time.”

Last Friday’s dollar index was at 96.203. This is up from Friday’s low of 95.973, when it experienced its largest one-day decline since May.

After dropping to 112.99 Monday, the greenback gained 0.24% and climbed to 113.80 Japanese yen.

The Australian dollar increased to $0.7146. This is a continuation of its recovery from Friday’s low of $0.71125.

The euro was almost flat at $1.12955, down from Monday’s record of $1.1335

Due to the dovish attitude of European Central Bank policymakers in face of rising inflation, the euro had fallen to an almost 17-month low of $1.1186. On Tuesday, the euro area’s latest consumer price data will be released.