By Gina Lee

Investing.com – The dollar was down on Wednesday morning in Asia, but investors still struggled to grasp its direction due to holiday-thinned trading.

By 10:46 ET (03:46 GMT), the index that measures the greenback’s performance against other currencies fell 0.04%, to 96.165 Overnight, the euro fell 0.14% to $1.1307 while the pound dropped from its five-week peak to reach 96.165. It was previously at 95.958 Friday.

The two-year Treasury yields rose, boosting the dollar. They reached an almost two-year peak on Tuesday.

At 114.81, the pair stabilized.

Both the pair fell 0.03% at 0.7226, and fell 0.07% at 0.6807.

The pair inched up 0.05% to 6.3718 as investors continue to digest that People’s Bank of China reiterated that the yuan exchange rate will be more flexible in 2022 and will remain stable overall.

The pair stabilised at 1.3434.

Some investors cautioned that the real direction of the dollar is difficult to interpret from recent movements, as traders have been off-duty for the holiday season.

“Things are mostly noise right now, though we are probably seeing a soft risk-on/risk-off dynamic going on with stocks down slightly, and the dollar has caught a bid on the inverse of that,” IG Markets analyst Kyle Rodda told Reuters.

Rodda remains bullish on U.S. currencies longer-term, despite imminent interest rate rises by U.S. Federal Reserve, and lower chances of future lockdowns.

In anticipation that the Fed might raise interest rates prior to other major central banks like the European Central Bank (ECB), the dollar index has seen its highest year since 2015 in 2021.

Asia Pacific stocks closed down on Tuesday, after four straight sessions of gains.

Investors also monitor the effect of the omicron COVID-19 variation with optimism that it will not affect the world’s economic recovery.

However, cryptocurrencies saw bigger moves. Both Ether and Bitcoin lost approximately 6% Tuesday. The assets see larger moves during low liquidity periods like holidays or weekends, which can lead to lower trading volumes.