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21 Dec 2021

Dollar Rebounds as Fears over Omicron Continue to Persist

The Index Today

The dollar made a slight recovery on Tuesday owing to returning interests in currencies and risk assets, despite Biden’s failed Build Back Better Act.

However, the looming threat of the Omicron prevented major investments due to the resulting COVID-19 rules and restrictions in certain countries.

The dollar index dipped to 96.450 while the euro rose to $1.1282. Despite the drop, the dollar remains firm having hit a notable high of 96.914 the previous week due to the Federal Reserve’s decision to hike interest rates for a proposed three times next year.

The current drop can be attributed to Biden’s Climate Action Plan failure following Senator Joe Manchin’s decision to veto the bill. Kyle Rodda, an IG markets analyst said, "The dollar pulled back on the breakdown of Build Back Better. Less stimulus, weaker growth, and rates dropping at the short-end was enough to push the dollar slightly lower."

The two-year U.S. Treasury yields hit another record low this month at 0.5870%, spelling a further drop.

In the midst of such developments, the Omicron continues to pose a serious threat as countries tighten rules and impose fresh restrictions, prompting further risky conditions for oil and the share markets.

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