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Yen shines, Aussie sags as Powell turns hawk despite Omicron uncertainty -Breaking


© Reuters. FILE PHOTO – This photo illustrates the U.S. Dollar and Japan yen bills on June 2, 2017. REUTERS/Thomas White/Illustration/File Photo

Kevin Buckland

(Reuters] – On Wednesday the safe-haven yen remained steady, while the risk-sensitive Australian dollars remained near a one year low. Federal Reserve Chair Jerome Powell announced a more rapid taper of stimulus despite concerns about the Omicron COVID-19 version.

Investors worry that excessive monetary tightening will impede the growth of the economy. Little is known about Omicron’s ability to bypass current vaccine protections or its potential for being deadly.

Shusukeyamada, Bank of America Merrill Lynch’s Japan FX strategist, stated “Investors are being cautious”.

It’s difficult to judge the effect of Omicron when there isn’t enough information.

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The head of the drugmaker caused global markets to fall sharply after Tuesday’s news. Moderna (NASDAQ:) The new COVID-19 variant will make existing COVID-19 vaccinations less effective, but BioNTech’s Chief Executive struck a positive tone, saying that the vaccine it produces with Pfizer (NYSE:) could offer protection against Omicron-related severe diseases.

Following a dip to $0.7063 Tuesday, the New Zealand dollar dropped 0.12% and fell to $0.71245. This was its lowest point since Nov. 3, 2020. After touching $0.6773 at the beginning of November, the New Zealand Dollar was mostly flat at $0.68195.

Although the greenback was 0.09% lower at 113.26 Japanese yen overnight, it is still well within reach of an overnight low in 112.535. This level has not been seen since Oct. 11.

In testimony before Congress Tuesday, Powell stated that Fed officials would discuss whether or not to stop bond purchases at the Dec. 14-15 policy conference. This was a change from what had been expected. On a long-standing contention that inflation was “transitory,” the Fed chief made a change of heart.

Powell said that Omicron would have a much smaller impact than the outbreak of the pandemic in 2020’s spring.

In response traders increased their expectations of interest rate increases, and money markets are now nearly priced in for tightening at June’s meeting.

Powell will continue his testimony on Wednesday.

“Powell’s overnight unexpectedly hawkish tone, basically asserting that growth/Omicron risk is more important than inflation risk, should not be taken seriously. ()”Forging ahead,” Westpac strategy writers wrote in a note to clients.

The dollar index measures six major peer currencies and traded at 95.921 Tuesday after falling to 95.544 on Monday. It was weighed down in large part by the unwinding bearish bets against the euro which is the largest component of the basket.

Westpac suggests that you buy dips in the Index down to the mid 95 level.

After a high of $1.1387 over the past two weeks, the single currency fell 0.04% to $1.1331, compared with its previous overnight record.

The Sterling exchanged hands overnight at $1.32955, not too far away from the $1.31945 low for 11 months.

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