Reassuring Omicron News Raises Bond Yields, Dollar Against Safe Havens

LONDON, December 6 (Reuters) – The dollar rose against safe-haven currencies such as the yen and Swiss franc on Monday after reassuring news about the Omicron COVID variant, while units like the Australian dollar that were battered by worries growth were also taken into account. an offer.

U.S. Treasury yields rose and stocks rose after news was announced that early observations suggested Omicron patients had only mild symptoms, reversing some of Friday’s massive selling read more

Friday lowered 10-year Treasury yields below 1.4% for the first time since late September and boosted the yen and Swiss franc. The dollar had tumbled as much as 0.4% against the Japanese currency. ,.

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The greenback’s losses on Friday also followed a weaker-than-expected employment report, although the data did little to shake market expectations.

As of 11:00 GMT, the dollar was stable against a basket of currencies around 96.19 but within the range of the 16 month November peak of 96.938. It was up 0.4% against the yen to 113.35 yen and rebounded by a similar amount against the franc.

“The dollar capitalizes on the narrative that the Fed is sticking to its plans for a faster cut, which we got last week from (Fed Chairman Jerome) Powell,” said Francesco Pesole, ING strategist Bank FX.

Long dollar positions climbed for the second consecutive week to the highest since June 2019, US CFTC data showed on Friday, while bearish euro positions hit their highest level since March 2020.

dollar positions

The euro slipped slightly against the dollar to around $ 1,130.

Pesole said a further build-up of long positions in the dollar was likely, given divergent political expectations, especially against the euro.

Meanwhile, the Australian dollar rose 0.5% to $ 0.704, falling from its 13-month low. The Norwegian krone, which also hit its 13-month low on Friday, strengthened 0.3%.

These currencies were also supported by a slight narrowing of the Treasury yield curve, where the spread between two-year and 10-year yields touched the narrowest in a year on Friday.

However, analysts believe the curve will flatten further, especially if inflation data expected later in the week bolsters expectations of the Fed’s policy tightening. This could hit the Australian and Norwegian currencies again, Pesole said.

“If you look at the shape of the yield curve, the flattening of the 2-10 (year) segment normally results in commodity currencies underperforming,” he added.

Elsewhere, cryptocurrencies suffered big losses after a wild weekend that at one point crushed bitcoin by more than 20%. Bitcoin slipped 4% to around $ 45,500 on Monday read more.

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Reporting by Sujata Rao and Tom Westbrook; Editing by Catherine Evans

Our Standards: Thomson Reuters Trust Principles.

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