Dollar slips while Aussie and Norwegian crown outperform

NEW YORK: The euro, Australian dollar and other currencies recovered against the U.S. dollar as traders turned more positive about the economic outlook on Wednesday, even as Omicron cases rocketed and investors braced for more volatility.

Risk appetite has improved since Monday, when markets were rattled by government restrictions relating to the spread of Omicron, and after U.S. Senator Joe Manchin said he would not support a new fiscal spending package.

“The dollar is softening as risk-off impulses continue to ebb,” analysts at Brown Brothers Harriman said in a report on Wednesday, adding that “we are likely in a consolidative period for now given the lack of any major new drivers.”

The dollar dipped 0.19% against a basket of currencies to 96.257.

The dollar index, however, remains near a one-and-a-half-year high of 96.938 reached on Nov. 24, on expectations that the Federal Reserve is closer to raising rates than many other central banks.

Data on Wednesday showed that U.S. economic growth slowed sharply in the third quarter amid a flare-up in COVID-19 infections, but activity has since picked up, putting the economy on track to record its best performance this year since 1984.

The euro was last up 0.18% at $1.1310.

The risk sensitive Australian dollar gained 0.59% to $0.7196.

The greenback dipped 0.69% against the Norwegian crown to 8.8770. The Norwegian currency has benefited from rising oil and gas prices and has a positive seasonality for the weeks around Christmas.

Sterling gained 0.44% to $1.3327, despite data showing Britain’s economy grew more slowly than previously thought in the July-September period.

The weeks on either side of Christmas are typically low in volatility for currencies and other asset classes, analysts at ING said, though “this year some seasonal tendencies will be mixed with the Omicron variant threatening to force new restrictions and markets still processing a week full of key central bank decisions.”

Turkey’s lira steadied and held its recent gains after a rollercoaster ride in which it charged back from record lows due to President Tayyip Erdogan’s new steps to guard Turks’ savings against volatility.

Bitcoin was 0.14% weaker on the day at $48,861.