US dollar rises as Omicron restrictions undermine risk sentiment

The US dollar rose against a basket of currencies on Thursday as tighter restrictions in parts of the world to curb the spread of COVID-19, including a new version of Omicron, reduced investor appetite for riskier currencies.

The US dollar index rose 0.3 per cent to 96.193.

"I think we are seeing some caution in the markets because of Omicron. I think the concern that it will be worse than Delta has diminished, but reports of how easily transmitted this strain has caused additional caution," said John Doyle, vice president of dealing and trading at payment system FX Tempus Inc.

"There are concerns about how governments might respond, and the UK's" Plan B" is a perfect example of this."

UK Prime Minister Boris Johnson on Wednesday imposed tighter restrictions on COVID-19 in England, ordering people to work from home, wear masks in public places and use vaccine passes to slow the spread of the new variant.

Johnson said Omicron was spreading rapidly and had no choice but to go to Plan B while the revaccination programme accelerated.

"For the first time this week, there is no risk, so the dollar is against the entire G10 except for the refuge yen," Doyle said.

The dollar fell 0.2 per cent against the Japanese yen.

According to Exness Login Thai, investors were also waiting for US inflation data on Friday, which could set the tone for the Federal Reserve's interest rate hike strategy.

"I think we are seeing some adjustment in positions ahead of tomorrow's CPI data and various central bank meetings next week," Doyle said.

As the US Federal Reserve, European Central Bank and Bank of England meet next week to discuss monetary policy, investors will be waiting for forward guidance, especially from the Fed, where some analysts expect a quicker rollback of stimulus plans in the pandemic era.

China's yuan rolled back from a 3-1/2 year high on Thursday and was set to hit its biggest fall in more than four months after the central bank raised its foreign exchange reserve requirements.

The pound remained steady, just above the 2021 low reached on Wednesday when the "plan B" limits were announced.

Bitcoin fell 3.7% to $48,741.92, struggling to find a foothold after recovering from a sharp fall over the weekend.