After the panic over the appearance of the Omicron COVID variant, the currency market has stabilized. However, analysts are still rating the potential for market volatility in the near term.
The market moved relatively calmly in Asian trading earlier in the week (29/November) after the surprise discovery of Omicron, a vaccine-resistant COVID-19 variant that fueled the risk-off sentiment last weekend. The US dollar is trying to recover from the sharp decline, as reflected by the movement of the US Dollar Index (DXY) which is currently around 96.24.
Broadly speaking, market panic over the latest variant of COVID-19 which was initially detected in South Africa has started to subside. The AUD/USD pair is now up 0.32 percent at 0.7136 or up 0.32 percent on a daily basis, as well as NZD/USD which is up 0.19 from the daily open price in the range of 0.6824.
Even so, analysts warned that the possibility of increased volatility in the near term is still there. The current recovery in commodity currency performance is expected to be temporary. The reason is that the emergence of the Omicron variant actually triggers uncertainty that can overshadow high-risk profile assets further.
Omicron Has Spread In Many Countries
The market panic over the latest variant of COVID-19 is quite reasonable. The reason, Omicron is known to have spread in many countries including Australia, England, Canada, Germany, and Hong Kong. BioNTech said that within the next two weeks, they will be able to conclude whether the vaccine co-developed with Pfizer needs to be re-adjusted to counter Omicron.
“Until then, market volatility is likely to remain high… Markets seem to be forced to recalculate the outlook for global economic growth due to the emergence of the Omicron variant,” said Rodrigo Catril, FX strategist at National Australia Bank in a note.
Separately, Joseph Capurso of the Commonwealth Bank of Australia predicts the volatility of the forex market, especially in commodity currencies. Capurso even confidently revealed that it doesn't take more negative news regarding Omicron to push AUD/USD back below 0.7000.
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