FOREX-Euro, dollar stable with Omicron fears and central bank movements in focus

By Joice Alves

London, December 9 (Reuters)The euro, pound sterling and dollar stabilized on Thursday in hopes that some COVID-19 vaccines could neutralize the new variant of the Omicron coronavirus. Analysts said the focus was once again on monetary policy.

Some of the fears around the Omicron variant diminished after BioNTech BNTX.O and Pfizer PFE.N said three injections of their COVID-19 vaccine neutralized it in a lab test.

Analysts said if the test results were found to be correct, markets would continue to shift their attention to the next central bank move, which had been a major factor in the development of forex markets in recent weeks.

“A new study shows that a third injection of Pfizer vaccine could neutralize the Omicron virus. If so, markets’ attention should return to monetary policy,” said Jens Peter Sørensen, chief analyst at Danske Bank.

The euro EUR = EBS was 0.2 down to $ 1.1319 by 9:15 am GMT, still close to the week-long high reached the previous day.

The American dollar = USD, against a basket of currencies, rose 0.15% to 96.082, far from the 16-month high of 96.938 reached in November, as investors awaited a key Federal Reserve policy meeting scheduled for next week.

Expectations of an unwinding of US monetary stimulus had helped the dollar index rise in November, before the emergence of Omicron pushed it down.

The Fed is expected to announce that it will accelerate the reduction in its bond buying program at its meeting next week. US consumer price inflation data due Friday could also affect the Fed’s decision.

Meanwhile, investors have lowered bets that the Bank of England could raise interest rates at its December 16 policy meeting.

Sterling GBP = D3 changed little to $ 1.3207, after hitting new 2021 lows the day before against the dollar, as British Prime Minister Boris Johnson imposed tighter COVID-19 restrictions on England, ordering people to work at home, wear masks in public places and use vaccine passes.

“The modest tightening of restrictions in England, while inconvenient, remains insignificant compared to measures implemented across Europe,” said Michael Hewson, chief market analyst at CMC Markets UK.

One of the biggest winners in improving Omicron sentiment this week has been the Norwegian krone NOK = D3, which peaked nearly three weeks on Wednesday. It was down 0.75% for the last time at $ 8.9400.

“The currency was one of the hardest hit by the initial risk aversion shock, given its low liquidity and high beta to risk and oil,” ING told clients.

The Canadian dollar was largely unchanged after the Bank of Canada kept its overnight key rate at 0.25%, as expected, and maintained its forecast that a first hike could take place as early as April 2022. .

The Chinese yuan has hovered over three and a half years against the dollar due to continued seasonal demand from businesses at year-end, although some investors are increasingly cautious about how much Beijing would allow. the currency to appreciate more.

Bitcoin BTC = BTSP slipped 2.2% to just under $ 49,515 as it continues to trade in a narrow range after a steep fall over the weekend.

Global exchange rates

(Report by Joice Alves edited by Mark Potter)

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