Tom Westbrook

SYDNEY – On Monday, riskier currencies fought against the dollar. The Omicron variant uncertainty and expectations of hot U.S. inflation data putting downward pressure on interest rates boosted their position.

After a crazy weekend, which saw bitcoin drop to 20% at one point, cryptocurrencies suffered huge losses. Support was found at $49,000 Monday.

Smarting also from a huge drop in trade, the Antipodeans attempted to rebound early Asia trade. The mood was helped along by preliminary South African observations suggesting that Omicron patients experienced mild symptoms.

It rose 0.3%, to $0.7016. This is a slight improvement on its 13-month low. The price of gold rose 0.1%, to $0.6750

On Monday, the safe-haven yen fell 0.1% to 113.00 USD. The cautiously optimistic mood reflected a more positive outlook. Analysts expect bumpy rides ahead. Trade will be most sensitive to Omicron news on Friday and U.S. inflation statistics on Friday.

Last stable euro at $1.1303, sterling at $1.3232.

Analysts from ANZ Bank said that they should look for volatility, rather than a pattern. The Volatility Gauges for the battered Aussie & Kiwi hit their peak in around eight months on Friday as both currencies fell. [AUD/]

Omicron has only been discovered in 1/3 of U.S. state, but cases were also found in Europe, Asia, and Southern Africa.

The South African Medical Research Council’s article based upon early Pretoria observations found that most COVID-19 patients were admitted for other reasons than being oxygen-dependent. It is better news than any previous wave.

In recent sessions, traders have been unnerved by gyrations in Treasury markets. The U.S. yield curve flattened dramatically on the expectation that the Federal Reserve will soon move to curb inflation and end up curbing long term growth.

Last week’s mixed U.S. employment report did not change the market expectations about a more aggressive tightening. The consumer price report, due Friday, demonstrates that there is another argument for an early tapering. This report also gave support to dollar.

It started the week at 96.211. This is within the range of November’s peak of 96.938.

The interest rate futures market has priced U.S. rates rising around the middle next year. However, they only reached as high as 1.5% as far as late 2026. Traders are concerned about that change.

Chris Weston (head of research for broker Pepperstone) stated that “this is a difficult one to reconcile.” It suggests that the market believes the Fed will stop hiking after five hikes. This is far below the Fed’s median forecasts.

Weston indicated that an annual inflation rate of above 7% could cause a shakeup, contrary to the economists’ predictions for 6.7%.

“Inflation with a 7 as the big number would get the USD higher,” he said.========================================================

Prices for currency bids at 0033 GMT

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

Previous changes

Session

Euro/Dollar

$1.1299 $1.1311 -0.08% -7.51% +1.1327 +1.1299

Dollar/Yen

112.9150 112.8500 +0.12% +9.38% +113.0550 +112.9800

Euro/Yen

127.59 127.55 +0.03% +0.53% +127.8200 +127.5600

Dollar/Swiss

0.9191 0.9177 +0.15% +3.88% +0.9191 +0.9183

Sterling/Dollar

1.3229 1.3232 +0.01% -3.14% +1.3240 +1.3228

Dollar/Canadian

1.2840 1.2847 -0.06% +0.82% +1.2840 +1.2817

Aussie/Dollar

0.7008 0.7001 +0.14% -8.87% +0.7020 +0.6995

NZ

Dollar/Dollar 0.6746 0.6748 +0.05% -5.98% +0.6758 +0.6751

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Tokyo Forex Market Information from BOJ