Dollar firm but risk-sensitive currencies also rise

The dollar edged higher against a basket of currencies on Thursday, but its gains were capped as easing fears of fallout from the Omicron coronavirus variant supported higher risk currencies such as the Australian dollar and British pound. Ahead of the holidays and extended long weekend in the United States, most major currency pairs clung to narrow ranges.

“We think the majors are liable to remain more or less range bound over the holidays,” Shaun Osborne, chief FX strategist at Scotiabank, said in a note.

The dollar index, which measures the greenback against six major peers, was up 0.07 per cent at 96.174. The index remains close to the 16-month high hit late last month. Upbeat news on the vaccines and omicron-related hospitalizations helped boost investors’ appetite for risk, lifting stocks and pushing U.S. Treasury yields higher.

Two vaccine makers said their shots protected against Omicron as UK data suggested it may cause proportionally fewer hospital cases than the Delta coronavirus variant, though public health experts warned the battle against COVID-19 was far from over. Separately, data on Thursday showed the number of Americans filing new claims for unemployment benefits held below pre-pandemic levels last week, while consumer spending increased solidly, putting the economy on track for a strong finish to 2021.