Peter Nurse

Investing.com: The US dollar was largely unaffected in Wednesday’s European session. It struggled to find direction in holiday-thinned volume, but appears poised for strong growth in 2022. 

The Dollar Index which measures the greenback’s performance against six other currencies traded flat at 96.2230 GMT (13:55 GMT)

rose 0.1% to 114.90, just below Tuesday’s month-low of 114.94, fell 0.1% to 1.1305, edged lower to 1.3430, slipping from a five-week high, while the risk-sensitive edged higher to 0.7229.

“The week before and the one after Christmas are notably a low-volatility period for most asset classes including FX,” said analysts at ING, in a note. “This year some seasonal tendencies will be mixed with the Omicron variant threatening to force new restrictions and markets still processing a week full of key central bank decisions.”

Due to the fact that the safe-haven dollars have been in decline, there has been a recent surge in risk assets. This rally was driven by the view that the Omicron strain is less harmful than the Delta and therefore would not hinder the recovery of the global economy.

Despite this, it has had its best year since 2015. Many expect more gains for the greenback in the future. The U.S. Federal Reserve indicated recently that it would begin hiking interest rates in the next year before any other central banks, including the European Central Bank, and Bank of Japan.

“Given our view of the persistence of U.S. inflation pressures, we see further room for the Fed to turn hawkish,” said analysts at Nordea, in a note. “While the financial markets are already flirting with the chance of the Fed starting its rate hikes as early as at the mid-March 2022 meeting, we see more room for market pricing to increase longer out.”

Elsewhere,  rose 2.3% to 12.0812, with the lira weakening amid persisting investor concern over Turkey’s monetary policy, having surged more than 50% last week after President Recep Tayyip Erdogan announced a scheme to protect lira deposits against currency volatility.

Recent record-breaking falls in the Turkish lira were caused by the central bank cutting its policy rate 500 basis points from September, despite inflation rising.

The next iteration of the country’s inflation rate is due in early January, and is expected to have climbed above 30% in December for the first time since 2003, according to a Reuters poll.

A median forecast by 13 economists was 30.6%. This would represent the highest forecast since May 2003, when forecasts varied from 26.4%-37.3%.