Dollar lower as Treasury yields slip; Omicron worries linger

By Saqib Iqbal Ahmed and Elizabeth Howcroft

NEW YORK (Reuters) -The dollar came under pressure on Monday as U.S. Treasury yields slipped following a blow to Democratic spending plans in Washington and on concerns about the continued spread of the Omicron coronavirus variant.

The U.S. Dollar Currency Index was 0.2% lower at 96.388. The index, up about 7% for the year, has rallied in recent weeks.

“I think it is a lot of year-end flows right now,” said Kathy Lien, managing director at BK Asset Management. “With the Omicron scare, with stocks falling quite a bit, people are just liquidating and squaring off for the year.”

U.S. Senator Joe Manchin, a moderate Democrat who is key to President Joe Biden’s hopes of passing a $1.75 trillion domestic investment bill, said on Sunday he would not support the package, drawing a sharp rebuke from the White House.

Manchin appeared to deal a fatal blow to Biden’s signature domestic policy bill, known as Build Back Better (BBB), which aims to expand the social safety net and tackle climate change.

Goldman Sachs trimmed its quarterly GDP forecasts for 2022, lowering U.S. GDP forecast for Q1 2022 to 2% from 3%, not factoring in that BBB would become a law, and cut Q2 outlook to 3% from 3.5%, and Q3 forecast to 2.75% from 3%.

With last week’s slew of major central bank meetings out of the way, investors turned their focus to the rapid spread of the Omicron strain.

The Netherlands went into lockdown on Sunday and local newspapers in Italy reported that new restrictions were being considered there too.

“Investor risk sentiment has been undermined by further evidence over the weekend of the disruptive impact of the new Omicron COVID variant,” MUFG currency analyst Lee Hardman wrote in a note to clients.

Concerns that further curbs could be imposed in Europe to contain Omicron also weighed on investors’ appetite for riskier currencies.

The Australian dollar slipped 0.1%.

The British pound fell to a three-day low on Monday, struggling to hold above $1.32 against the dollar as a risk-off mood swept through financial markets and as pressure grew on policymakers to slow the spread of Omicron.

Turkey’s lira sputtered to another record low on Monday despite $6 billion in central bank interventions this month, after President Tayyip Erdogan doubled down on his unorthodox low-rates policy by referring to Islamic usury doctrine.

Meanwhile, cryptocurrencies bitcoin and ether edged lower, with bitcoin down 1.5% at $46,147.78 and ether down 2.2% at $3,819.51.

(Reporting by Elizabeth Howcroft; editing by Ana Nicolaci da Costa, Jason Neely and Mark Heinrich)

By Saqib Iqbal Ahmed and Elizabeth Howcroft

NEW YORK (Reuters) -The dollar came under pressure on Monday as U.S. Treasury yields slipped following a blow to Democratic spending plans in Washington and on concerns about the continued spread of the Omicron coronavirus variant.

The U.S. Dollar Currency Index was 0.2% lower at 96.388. The index, up about 7% for the year, has rallied in recent weeks.

“I think it is a lot of year-end flows right now,” said Kathy Lien, managing director at BK Asset Management. “With the Omicron scare, with stocks falling quite a bit, people are just liquidating and squaring off for the year.”

U.S. Senator Joe Manchin, a moderate Democrat who is key to President Joe Biden’s hopes of passing a $1.75 trillion domestic investment bill, said on Sunday he would not support the package, drawing a sharp rebuke from the White House.

Manchin appeared to deal a fatal blow to Biden’s signature domestic policy bill, known as Build Back Better (BBB), which aims to expand the social safety net and tackle climate change.

Goldman Sachs trimmed its quarterly GDP forecasts for 2022, lowering U.S. GDP forecast for Q1 2022 to 2% from 3%, not factoring in that BBB would become a law, and cut Q2 outlook to 3% from 3.5%, and Q3 forecast to 2.75% from 3%.

With last week’s slew of major central bank meetings out of the way, investors turned their focus to the rapid spread of the Omicron strain.

The Netherlands went into lockdown on Sunday and local newspapers in Italy reported that new restrictions were being considered there too.

“Investor risk sentiment has been undermined by further evidence over the weekend of the disruptive impact of the new Omicron COVID variant,” MUFG currency analyst Lee Hardman wrote in a note to clients.

Concerns that further curbs could be imposed in Europe to contain Omicron also weighed on investors’ appetite for riskier currencies.

The Australian dollar slipped 0.1%.

The British pound fell to a three-day low on Monday, struggling to hold above $1.32 against the dollar as a risk-off mood swept through financial markets and as pressure grew on policymakers to slow the spread of Omicron.

Turkey’s lira sputtered to another record low on Monday despite $6 billion in central bank interventions this month, after President Tayyip Erdogan doubled down on his unorthodox low-rates policy by referring to Islamic usury doctrine.

Meanwhile, cryptocurrencies bitcoin and ether edged lower, with bitcoin down 1.5% at $46,147.78 and ether down 2.2% at $3,819.51.

(Reporting by Elizabeth Howcroft; editing by Ana Nicolaci da Costa, Jason Neely and Mark Heinrich)