HONG KONG- The dollar hovered below recent highs on Tuesday having lost ground overnight after a blow to Democratic spending plans in Washington, but worries about the Omicron coronavirus variant kept risk currencies in check.
The dollar index, which measures the currency against six major peers, was last at 96.513, having lost ground on both the euro and the yen.
The greenback briefly approached 16-month highs at 96.914 last week, after the US Federal Reserve opened the door to as many as three interest rate increases in 2022, and then found support as worries about the Omicron strain caused investors to seek safety.
However, it pulled back on Monday, finishing the session down 0.12 percent after US Senator Joe Manchin, a moderate Democrat who is key to President Joe Biden’s hopes of passing a $1.75 trillion domestic investment bill – known as Build Back Better – said on Sunday he would not support the package.
“The dollar pulled back on the breakdown of Build Back Better. Less stimulus, weaker growth, and rates dropping at the short-end was enough to push the dollar slightly lower,” said Kyle Rodda, an analyst at IG markets.
Two-year US Treasury yields on Monday touched 0.5870 percent, their lowest since Dec. 3, also causing the yield curve to steepen.
