Peter Nurse

Investing.com: Tuesday’s dollar fell, as traders sought out more risky currencies on the earliest signs of mild Omicron Covid symptoms. A Chinese rate cut was a boost to market optimism.

The Dollar Index, which measures the greenback’s performance against six currencies in a basket, dropped 0.1% at 2:50 am ET (0750 GMT) and fell further than November’s peak of 96.938.

The stock traded 0.1% higher at 1.3281, and rose 0.2% to 113.72. Monday’s 0.6% gain was the largest since two weeks. Meanwhile, 1.1293.1 rose 0.1%.

Risk-sensitive increased 0.6% to 0.7091. This was in addition to Monday’s best percentage gain in seven week after the Reserve Bank of Australia cut rates to a new record low, but stated that the omicron version would not be expected to slow down the recovery.

Additionally, fell 0.1% to 6.3688 after the People’s Bank of China announced plans to cut banks’ reserve requirements by 50 basis points next week, for the second time in 2021. 

This will enable Chinese banks to release CNY1.2 trillion ($188 billion) of liquidity into the economy, helping ease the pressure on a number of property companies as well as supporting growth in the world’s second largest economy.

Supporting the general mood of risk taking were early indications from South Africa, where the Omicron variant was first discovered, as well as the U.S. that  those infected suffer relatively minor symptoms compared with previous virus waves. 

The dollar is still strong against the euro and the Federal Reserve expects to tighten monetary policy much sooner than its European counterpart.

Fed funds futures are still pricing in more than two full U.S. rate increases next year, beginning in May, a view that is likely to be cemented later this week, with Friday’s consumer price report expected to show another sharp rise in the annual inflation rate in November.

“We have just seen a terrible number for October and one suspects the only help that the euro can get before year-end is if the ECB turns less dovish,” said analysts at ING, in a note. 

However, it’s difficult to see that chance coming as ECB President Christine Lagarde has consistently taken the view that surging consumer prices will be temporary, and thus the European Central Bank should stick with its ultra-supportive stance.