Tom Westbrook

SYDNEY – On Tuesday the dollar was supported by other safe-haven currencies, such as the Japanese yen, while holding on to a jump with U.S. yields. The move came as investors hoped for early indications that the Omicron variant might be mild.

Even though riskier currencies are also available for purchase, the Australian dollar has firmed up after Omicron was praised by the central bank, which did not make any policy changes.

After the meeting of the Reserve Bank of Australia, the currency rose by 0.2% to $0.7066. That’s an increase of around 0.2%. It was up from Monday which had seen its largest percentage gain for seven weeks.

While rates were set at record lows by the Reserve Bank of Australia, Omicron did not appear to be expected to slow down recovery.

Monday’s 0.6% decline in the yen, which was its biggest drop in nearly two weeks, saw it trade at 113.53 USD. After suffering its biggest one-day percentage drop in almost three months, the Swiss Franc, another safe-haven currency, stabilized. It fell through both 200-day as well as 50-day moving averages Monday.

Rodrigo Catril of NAB, a strategist said that “even though there’s still uncertainty about Omicrons’ health and economic impacts, investors have welcomed news from South Africa suggesting that the exponential increase in Omicron infective hasn’t been followed by large-scale hospitalisations.”

Initial observations from South Africa indicate that those who have been infected are experiencing relatively mild symptoms in comparison to previous waves. Anthony Fauci (the top U.S. official for infectious diseases) said that it does not seem to be too serious.

The markets were buoyed by the reductions in China’s banks reserve requirements, as well as cuts to rates at rural and small-business rate. This did not impact the demand for the currency, which was 6.3713 against the dollar. [CNY/]

After a weekend of wild sell-offs, support seemed to be returning to cryptocurrency. Bitcoin remained steady at $51,230.

The euro is under pressure as investors continue to bet on U.S. rates rising much earlier than in Europe. Common currency lost modestly Monday to $1.1291 Tuesday.

Fed funds futures include more than 2 full U.S. rate hikes next year. They began in May. Treasury yields slightly rose to increase jumps across the curve on Monday.

Sterling rose 0.2% at $1.3283, but it is trailing other majors as the market shorts sterling. Omicron thinks Omicron lowers the probability of a rate rise next week.

This has been an anomaly, with the dollar falling to $0.6737 per year on Tuesday despite the fact that the Reserve Bank of New Zealand continues its aggressive growth path and the Assistant Governor Christian Hawkesby praising the currency.

Analysts at ANZ Bank stated that “it does seem like market fatigued by the NZ positive news story” and was less inclined to reward currencies headed for higher interest rates. Higher rates are usually a sign of strong growth. However, in an environment where there is less supply, they may indicate slower growth. The NZD is not being helped by NZ’s high pile cash rate and expectations for more increases to come.

Omicron is not the only central bank in discussion. Markets expect the Bank of Canada to meet on Wednesday and set course for next year’s rate increases. Next week will see the Fed, Bank of England (BoE), European Central Bank, and Bank of Japan meet.