USD/JPY Slips In Response to Moderna Boss Comments

USD/JPY slipped around 0.4 percent to a low of 112.95, while USD/CHF was down for three days in a row to 0.9200.

The safe-haven currency strengthened again in early European trading today (30/November), responding to Moderna's CEO's comments about the Omicron variant of COVID-19. USD/JPY slipped around 0.4 percent to a low of 112.95, while USD/CHF was down for the third day in a row to the 0.9200 range. On the other hand, commodity currencies fell together.

In an interview with The Financial Times, Moderna CEO Stéphane Bancel revealed that the COVID-19 vaccine is unlikely to be effective against the Omicron variant. He said, "I don't think there's a world where (effectiveness) is at the same level... that we have with Delta."

Moderna is currently reworking its COVID-19 vaccine to create a suitable booster for Omicron. Meanwhile, rival company BiONTech announced that it had started work on creating a vaccine specifically for Omicron. The announcement comes just a day after BiONTech said it would take two weeks to investigate whether the previous COVID-19 vaccine needed to be reworked to ward off Omicron.

The USD/JPY exchange rate had strengthened on the previous trading day in connection with the news that President Joe Biden promised not to implement another lockdown in the US. However, the latest announcements from vaccine makers are again raising concerns in the market.

The emergence of the Omicron variant has also forced market participants to re-evaluate the projected rate hike. In a draft testimony to be delivered today, Fed Chair Jerome Powell said the Omicron variant could result in high inflation rates to last longer. Previously, he also stated that the labor market is very vulnerable to being affected by Omicron.

Powell's remarks typify the urgency to raise interest rates more quickly. In fact, public reactions and a number of government policies to contain the spread of the virus may hamper economic growth in the same period.

Money markets are currently pricing in a pretty good chance of a Fed rate hike in July 2022. However, the odds are even higher in September 2022.