Dollar gains on Omicron news, euro up 0.4% against yen

Dollar gains on Omicron news, euro up 0.4% against yen

LONDON, Dec 6 Reuters -- The dollar moved higher on Monday as Treasury yields rose from last week's 2 -- 1 2 month lows, after initial observations suggested that those suffering from the Omicron COVID 19 strain only had mild symptoms.

Omicron news from South Africa helped reverse some of the moves from Friday when Wall Street sold off heavily.

The selloff had taken 10 year Treasury yields below 1.4% for the first time since September and boosted the safe-haven yen and Swiss franc. The dollar had fallen as much as 0.4% against the Japanese currency. Friday's losses followed a below-forecast jobs report, but the data did not shake market expectations that the Federal Reserve will accelerate the pace of unwinding stimulus and raise interest rates next year.

The dollar index was 0.10% higher at 96.29, within the range of November's 16 month peak of 96.938. It was also 0.2% higher against the yen at 113.05 yen and rebounded 0.4% to the franc.

The Fed sticking to its plans for quicker tapering, which is what we had heard about last week from Fed Chair Jerome Powell, said ING Bank FX strategist Francesco Pesole.

The dollar long positions climbed to the highest since June 2019 for the second consecutive week, while bearish euro positions rose to the highest since March 2020, according to data from the U.S. CFTC.

The euro fell a quarter percent to the dollar.

Pesole said a further dollar long build-up was likely due to divergent policy expectations, especially against the euro.

The Australian dollar was up 0.5% to $0.7035, scraping itself off a 13 month low. The kiwi increased by 0.1% to $0.6750.

Riskier currencies were supported by a slight increase in the Treasury yield curve, where the gap between two and 10 year yields widened slightly after touching the narrowest in a year on Friday.

The curve will flatten further, especially if inflation data comes later in the week reinforces policy tightening expectations from the Fed, according to analysts.

If you look at the shape of the yield curve, the flattening of the 2 -- 10 segment normally brings some underperformance in commodity currencies, Pesole said.

A wild weekend in cryptocurrencies resulted in big losses for the cryptocurrencies, which at one stage crushed more than 20% of their value. On Monday, there was support of around $49,000.