Dollar rises, euro falls as markets calm

Dollar rises, euro falls as markets calm

LONDON, November 29, Reuters -- The dollar edged higher, the euro fell and the yen settled on Monday as currency markets reversed some of Friday's moves, calming after the initial shock of discovering a new coronavirus variant.

Financial markets sold off on Friday because of fears that it would disrupt the economic recovery after the two-year Pandemic, because of the Omicron variant first detected in southern Africa.

The World Health Organization said it was not yet clear whether Omicron is more transmissible than other variants or if it causes more severe disease.

Markets calmed somewhat on Monday, with U.S. stock futures and oil prices rebounding, as investors took a more balanced view and waited until the impact of the variant becomes more clear.

The U.S. dollar index, which had its biggest one-day drop since May on Friday, moved back higher, and was up 0.1% on the day at 96.326 at 0821 GMT.

The dollar's status as a safe-haven currency means it can benefit from uncertainty, but it fell on Friday because the Omicron variant was seen as potentially affecting when the Federal Reserve and other major central banks raise rates.

The euro was down by 0.4% against the dollar on Friday, at $1.12665.

In a client note, Commerzbank's head of FX and commodity research Ulrich Leuchtmann wrote that the euro had initially benefited from the Omicron variant because of the dovishness of the European Central Bank.

If Omicron leads to a lock down and a reduction in economic activity on a global scale, all rate hike expectations turn out to be in vain and then they will be priced out pretty quickly, he said.

The ones where rate hikes were never priced in the first place were the ones where rate hikes were never priced in the first place. They were EUR, JPY and CHF. Japan's yen was up around 0.2% compared to the dollar at 113.33 at 0829 GMT. The euro-yen hit a new nine month low.

The Swiss franc reversed recent moves. It had its biggest one-day jump against the dollar since June 2016, a slightly bigger daily move than at the peak of the first coronaviruses market shock in March 2020, but on Monday it was down 0.4% on the day, at 0.9256.

The currency markets would likely remain volatile until the new variant is understood, according to analysts.

The vaccine efficacy results with the next two weeks will be the most important headline to watch out for as well as whether symptoms are different from those of other variants, wrote Nomura analyst Jordan Rochester in a note to clients.

Goldman Sachs said it would not change its economic forecasts on the basis of the Omicron variant until its likely impact becomes clearer.

BioNTech said on Friday it may be notified within two weeks if the vaccine it developed with Pfizer needs to be reworked.

On Sunday, the price of cryptocurrencies hit a seven-week low before picking up. It was at $57,386 at the time of 0837 GMT. On the day, 24 was up around 0.1% but still below its latest all-time high of $69,000, which was hit earlier this month.