The USD/JPY currency pair hit the ground running at the start of the week and is now hovering near one-month highs.
The US dollar index (DXY) edged up to around the 96.20s on Wednesday (29/December). The greenback displayed mixed performance amid the lack of forex market liquidity ahead of the turn of the year. Most currency pairs have continued to circulate in fairly narrow sideways ranges since the end of last week, with the exception of USD/JPY which hit the gas earlier in the week and is now perched near one-month highs.
The spread of Omicron continues to boost hospitalization rates for COVID-19 patients in various countries. However, more and more countries are thinking twice about imposing a national lockdown again like during previous waves of COVID-19. China and a number of European countries have imposed lockdowns, but France and Britain have been reluctant to tighten existing social restrictions.
The US also seems unwilling to declare a lockdown at the federal or state level. US health authorities recently even cut the recommended isolation period for OTG (Asymptomatic Persons) patients from 10 days to 5 days.
All of this contributed to eroding market concerns about the impact of the Omicron on the economic recovery, so that the Japanese yen slumped versus the USD and various other major currencies. However, a number of analysts warned not to examine the market movements ahead of the close of the year in depth, because the majority of traders have taken time off since Christmas.
"It's mostly just noise right now, although we may see a weak risk-on/risk-off dynamic taking place with stocks dropping a bit, and the dollar having instead strengthened," said Kyle Rodda, an analyst at IG Markets. Reuters.
Rodda assesses the greenback in the long term remains bullish. The reason is because the Federal Reserve is getting closer to the moment of its anticipated interest rate hike, while the potential for a lockdown in the United States also seems to have diminished.
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