Dollar down again as traders brace for volatile day

Dollar down again as traders brace for volatile day

HONG KONG, December 22, Reuters -- The dollar was down again in early Asia as investors favoured riskier currencies and asset classes, starting a third session in early Asia on Wednesday.

On Tuesday, the New Zealand dollar rose 0.8%, its best day since October, recovering from near a year low to $0.6757 and the pound gained 0.46%, its best day in a month, at $1.3267.

The dollar gained 0.44% on the safe haven and gained 0.44% on the safe haven with advances in oil and a 1.6% gain in MSCI's gauge of stocks across the globe.

The dollar index, which measures the currency's value against major peers, was last at 96.441, down from as high as 96.994 last week when it was testing a 16 month high.

Market players struggled to point out a clear reason for the risk on mood, saying markets were struggling to assess the consequences of the Omicron variant of COVID-19, leading to unseasonable volatility.

The dollar index had gained 0.7% on Monday and the stock market sold off sharply on Monday.

While the weeks between Christmas and Christmas are typically low in volatility, analysts at ING said 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. The U.S. Federal Reserve signaled plans to tighten in 2022, but the European Central Bank was only slightly reining in the stimulus after Britain became the first G 7 economy to raise interest rates since the onset of the epidemic.

In Europe, the United States, and Asia, omicron infections are multiplying, leading countries to consider new restrictions on movement and impose quarantine periods for incoming visitors.

A Bloomberg report said the U.S. Food and Drug Administration is set to authorise COVID 19 treatment pills from both Pfizer Inc and Merck as early as Wednesday may have helped the mood.

The euro was last at $1.1289 on Wednesday, which would be its third successive session of gains.

In emerging market currencies, traders were bracing for another day of volatility for Turkey's lira, which closed up 6% on Tuesday, after having been down as much as 8.6% and up as much as 18.5%.

After a 4% gain on Tuesday, the price of digital currency was largely unchanged below $49,000. The world's second-largest criptocurrency, Ether, has gained this week and was just above $4,000.