News of a COVID-19 variant probably resistant to current vaccines sent investors dashing for the security of the Japanese yen and the Swiss franc on Friday, and traders also took profits following an extended rally in the U.S. dollar.
The gains in the yen and the franc developed at the expense of the growth-sensitive Australian dollar and Norwegian crown. However, smaller volumes following Thursday’s U.S. Thanksgiving holiday made market moves more volatile.
A senior Biden administration official stated that the United States would restrict travel from South Africa – where the new mutation was identified – and neighboring countries starting Monday.
The World Health Organization (WHO) stated it was designating the variant as being of concern. WHO named the variant omicron, a label utilized only to four variants to date. It could need weeks for scientists to understand the variant’s mutations and possible dangers fully.
One of the prominent gainers was the yen. It jumped off five-year lows this week versus the dollar and jumped nearly 2% to a high of 113.09. This was its best day after March 2020.
The euro increased 0.97% to a high of $1.1312. However, it dropped to more than six-year lows versus the resurgent Swiss franc, at 1.0428 francs per euro.
Doubtful accounts had been massively short safe-haven assets, with U.S. CFTC figures presenting net bearish positioning at $1.2 billion and $10.3 billion for the yen and Swiss franc, individually, in the latest week.
The dollar index dropped 0.75% to 96.030, following reaching a 16-month high of 96.938 on Wednesday. It has surged from 93.872 on Nov. 9 as investors increased bets that the Federal Reserve will begin hiking interest rates in mid-2022 to stop stubbornly high inflation.
CIBC’s Rai stated Friday’s drop in the dollar was more likely because investors took profits following the currency’s recent gains and not switching the dollar’s safe-haven status.