The dollar fell against a number of major counterparts on Wednesday, as easing concerns over the economic hit from the Omicron COVID 19 variant helped support riskier currencies, with the Australian dollar on pace to make a third straight session of gains.
The dollar index, which measures the dollar against six major peers, fell by 0.2% to 96.06. The index is close to the 16 month high hit late last month.
Concerns about Omicron seem to be fading a bit, especially as increasing albeit unconfirmed data emerges pointing out infections caused by the new variant being milder than previously thought, Michael Brown, senior analyst at payments firm Caxton, said in a note.
Investors' appetite for riskier assets increased this week amid reports that people in South Africa have only shown mild symptoms of the Omicron variant.
Preliminary evidence indicates that the new variant likely has a higher degree of transmissibility but is less severe, top U.S. infectious disease expert Anthony Fauci said on Tuesday.
The Australian dollar, as well as commodity-linked currencies, were the main beneficiaries of the improved risk sentiment.
The Aussie dollar was at $0.7152, its highest level in a week.
The Bank of Canada held its key overnight interest rate at 0.25%, as expected, and maintained its guidance that a first hike could come as soon as April 2022, keeping the Canadian dollar largely unchanged.
The Norwegian crown was up about 1.5% against the U.S. dollar, helped by improved risk sentiment and steady oil prices.
After reports that the UK government was about to announce new COVID 19 restrictions prompted investors to dump riskier assets, the pound fell 0.4% to a 2021 low and British stocks briefly fell into negative territory on Wednesday.
After Saturday's sharp and sudden plunge, the price of digital currency recovered. It was up 0.73% to $50,893 on Wednesday. As the U.S. Congress hears from top executives from six criptocurrencies firms, the need to tread lightly in imposing new rules on digital assets.