Dollar flat on hopes of recovering recoveries

Dollar flat on hopes of recovering recoveries

HONG KONG, Dec 9, Reuters -- The dollar didn't pick up ground on Thursday, as markets saw optimism in early data indicating the new coronaviruses may not be as bad as feared, even as new COVID 19 restrictions in Britain hurt the sterling.

After a midweek rally in risk assets, such as equities, the euro was at $1.1338, after gaining 0.7% on Wednesday to a week high of 1.1354, and the Aussie dollar was at $0.7168 just off Wednesday's week high.

MSCI's all-country world index is back to normal, having had its best day in more than a year on Tuesday and rising further on Wednesday.

Markets were roiled last week by news of the new strain of COVID 19, which drove investors to safe havens but have since taken heart from signs that the worst fears may not be realized.

BioNTech and Pfizer said on Wednesday a three-shot course of their COVID-19 vaccine neutralised the new Omicron variant in a laboratory test, which indicates that booster shots could be a key to protection against infection from the newly identified variant.

Paul Mackel, global head of FX research at HSBC, said it was very ''virus-on' ''virus-off' in the FX market and I think we are going to be stuck with this for a long time. The intraday moves are very volatile because the headline risk associated with Omicron is very high and it's very confusing. On Wednesday, the pound dropped to a a year low after British Prime Minister Boris Johnson imposed tougher COVID 19 restrictions in England, ordering people to work from home, wear masks in public places and use vaccine passes.

The pound rebounded a bit to $1.3202 at the end of the day.

A December meeting of the U.S. Federal Reserve next week is on traders' minds, which could announce an acceleration of the tapering of its bond-buying programme.

The different paces at which global central banks would raise rates had been a major factor in currency markets before the arrival of the Omicron variant.

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, having gained to its highest in around three weeks ahead of the meeting, along with higher oil prices.

After top executives from six major criptocurrencies companies including Coinbase and Circle urged Congress to give more clear rules for the booming $3 trillion industry, the price of the virtual currency was about flat at $50,400 on Wednesday.