TOKYO, December 14, Reuters -- The dollar went up a one-week high against a basket of major rivals on Tuesday, backed by expectations of a hawkish Federal Reserve meeting this week and hasn demand amid uncertainty about the Omicron coronavirus variant.
The Australian dollar dropped as much as 0.64% to a one-week low.
A series of central banks have announced policy decisions this week, including the Bank of England and the European Central Bank on Thursday and the Bank of Japan on Friday, as well as a two-day meeting that begins later Tuesday.
The dollar index, which measures the currency against six peers, rose as high as 96.464 for the first time since Dec. 7 before trading 0.04% firmer at 96.404.
The U.S. central bank is expected to announce it will wrap up its bond buying stimulus sooner than previously, potentially setting up earlier interest rate increases next year.
Money markets are saying there is a chance of a rate hike by June, with another as early as November.
That leaves a very high bar for the Fed to deliver a hawkish surprise, Westpac strategists wrote in a client note.
Even if the Fed matches elevated expectations, they are still ahead of the European Central Bank who is looking for ways to maintain accommodation after its Pandemic Emergency Purchase Programme, PEPP is due to end in March.
The dollar index's advance has recently slowed, but the analysts said that pullbacks into the mid-95 level are a buy.
A poll of ECB-watchers found that the ECB would halve the amount of assets it buys each month from April.
The euro fell 0.07% to $1.1278 after touching a one-week low of $1.12605 overnight.
The pound dropped to $1.32035, a one-year low of $1.31615 reached last week.
Britain has reported the first publicly confirmed death from Omicron, Prime Minister Boris Johnson said on Monday, a day after he warned of a tidal wave of infections from the new variant.
British scientists have found that two doses of current COVID 19 vaccines do not induce enough neutralizing antibodies against Omicron.
State media said Monday that mainland China detected its first case of Omicron infection.
The dollar was barely changed at 113.565 yen, another safe haven, consolidating in the upper end of the pair's trading range this month.
The Aussie declined by 0.39% to $0.71060 at the end of the day.
The leading criptocurrency went up 0.49% to $46,957. On Monday, the digital token plunged below $42,000 for the first time since September, and lifted off Monday's low of $45,750, a level not seen since December 4.