Safe-haven yen hits one-month low as Omicron concerns ease

The yen retreated to a near one-month low to the dollar on Tuesday as safe-havens fell out of favour after Wall Street’s rally to a record high consigned Omicron concerns to the background.

The Japanese currency weakened as far as 114.935 yen per dollar for the first time since Nov. 26 before recovering to last trade around 114.80, helped by a decline in long-term Treasury yields.

The dollar, also considered a safe-haven, continued to hover above the bottom of its recent trading range versus a basket of peers. It received only limited support from expectations the Federal Reserve could raise interest rates as early as March.

The dollar index, which measures the currency against six major rivals, was little changed from the previous session at 96.078.

The S&P 500 ended at a record high on Monday after strong U.S. retail sales data eased worries that the highly infectious Omicron coronavirus variant would scupper the economic recovery.

Money markets are pricing better than 50% odds for a first quarter-point rate hike by March and are close to fully priced for three increases by December 2022 after Fed officials signalled a faster pace of tightening at their policy meeting this month.

“Markets globally are optimistic” that the fallout from Omicron will be contained, said Osamu Takashima, head of G10 FX strategy at Citigroup (NYSE:C) Global Markets Japan.

The fact that U.S. equities rallied despite expectations for faster Fed tightening “implies that currently investor risk appetite must be very, very strong,” he said.

The yen is likely to test its 2021 low of 115.525 in the near term, he predicted.

Sterling, which often rises when risk sentiment improves, hovered not far from the one-month high of $1.3445 reached overnight.

The Australian dollar, often considered a liquid proxy of risk appetite, inched up back toward a three-week high of $0.6850 reached Friday.

The euro consolidated near the top of its range against the dollar this month, little changed from Monday at $1.13255.

Currency bid prices at 0559 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1328 $1.1327 +0.01% -7.28% +1.1332 +1.1319

Dollar/Yen

114.8750 114.9100 -0.03% +11.22% +114.9450 +114.7800

Euro/Yen

130.13 130.13 +0.00% +2.53% +130.2200 +130.0200

Dollar/Swiss

0.9174 0.9178 -0.04% +3.69% +0.9178 +0.9165

Sterling/Dollar

1.3437 1.3442 -0.03% -1.64% +1.3442 +1.3432

Dollar/Canadian

1.2787 1.2786 +0.10% +0.51% +1.2798 +1.2788

Aussie/Dollar

0.7242 0.7240 +0.03% -5.86% +0.7244 +0.7230

NZ

Dollar/Dollar 0.6813 0.6815 +0.01% -5.08% +0.6817 +0.6810

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ