The Dollar is Struggling to Regain its Lost Ground

This week’s rally in risk-sensitive currencies like the Australian dollar came to an end on Thursday. Nonetheless, the greenback struggled to regain its lost ground as investors are waiting for information from a key Federal Reserve meeting. The meeting will take place in the next week. 

On Thursday, the Australian dollar was steady at $0.7171 just off Wednesday’s week high, having gained this week along with equities. The euro stood at $1.1331, after jumping 0.7% on Wednesday to a week high of 1.1335. 

The main challenge for the markets is the new strain of Covid-19, which drove investors to safe havens last week.

 Information provided by BioNTech and Pfizer helped alleviate concerns regarding the Omicron variant. According to companies, a three-shot course of their Covid-19 vaccine neutralized the Omicron variant in a laboratory test. Booster shots have the potential to play an important role against the Omicron variant.

Omicron variant, central banks, and dollar

The British pound fell to a year low on Wednesday after British Prime Minister Boris Johnson imposed restrictions in England. He imposed tougher Covid-19 restrictions, ordering people to work from home, and wear masks in places. People also must use vaccine passes. 

The British pound stood at $1.3207 on Thursday. 

The Omicron variant is also making it harder for market participants to predict how quickly central banks will reduce pandemic-era emergency stimulus and raise interest rates.

 The Canadian dollar was largely unchanged on Thursday after the central bank held its key overnight interest rate at 0.25%. The Bank of Canada maintained its guidance that a first hike could come as soon as April 2022. 

On Thursday, China’s yuan hovered at a more 3-½-year high against the U.S. dollar, on continued year-end seasonal corporate demand. However, some investors growing anxious over how much more China would allow the currency to appreciate.