US Dollar Flags as Optimism on Global Economy Reduces Demand for Haven Assets

The US Dollar flagged to a one-week low against other major currencies as investors shifted toward a more positive outlook for the global economy.

Fueled by news that Omicron will not be as serious as previous variants, risk appetite has improved, stemming from the move toward haven assets like the US Dollar.

The dollar index, a measure of the currency against six major rivals, hovered at 96.111, close to its overnight low of 96.020, a mark not seen since the height of Omicron panic last week. Market commentators expect the dollar to strengthen in the New Year after a more bullish position by the US Fed promised an interest rate increase as early as March 2022. This type of clarity has put the US Dollar in a better position than currencies from Europe, Japan and Australia, whose central banks have been vague on planned monetary policy interventions.

What does this mean for me?

As a FOREX trader, you will have been following the major market news in the last few weeks to get a better understanding of how key currencies will fare in 2022. 

Central banks like the US Fed and the Bank of England have been forthright in their desire to manipulate monetary policy for the benefit of their currencies. The US Dollar is a good example of this, with analysts expecting the currency to appreciate on the back of policy clarity that will remove some of the risk aversion from investors.