FOREX-Yen, Swiss franc rally on global outlook risks after hawkish Powell

BY Reuters | ECONOMIC | 11/30/21 04:28 PM EST
       * Fed's Powell says risks of inflation rising
    * Fed's Powell says may accelerate pace of bond taper
    * Omicron risks weigh on market sentiment
    * Graphic: World FX rates

 (Recasts, adds new comment, updates prices)
    By Caroline Valetkevitch and Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 30 (Reuters) - The safe-haven yen and Swiss Franc gained on Tuesday, with risk appetite
plummeting, as investors grew nervous about a suddenly hawkish Federal Reserve that could deliver aggressive
rate hikes and derail a nascent economic recovery.
    Worries about the new Omicron coronavirus variant also kept a bid in these safe-haven currencies.
    The dollar, on the other hand, retreated on Tuesday after rising when Fed Chair Jerome Powell said the
risk of inflation had increased and suggested retiring the term "transitory" to describe the surge in
prices. He also pushed for accelerating the tapering of Fed asset purchases.
    His comments suggested an urgency to undertake quick monetary policy action that financial markets may
not be prepared for, analysts said.
    "Overall, the risks to the short-term outlook keep on growing. Investors have always viewed the Fed as
the safety net, but the Fed looks like its panicking here," said Edward Moya, senior market analyst, at
OANDA in New York.
    "The Fed was wrong on inflation. And now it appears they're going to rush tapering and quickly deliver
rate hikes. And if the inflationary pressure remains, you could see an accelerated rate hike cycle that
could threaten financial conditions."
    In late trading, the dollar fell 0.4% against the yen to 113.065 yen.
    Against the Swiss franc, the dollar dropped 0.4% to 0.9185 francs.
    The dollar index fell 0.3% to 95.90. It rallied earlier, while U.S. stocks fell, after Powell's
hawkish remarks.
    "Traders are in 'sell first and ask questions later' mode," said Karl Schamotta, chief market strategist
at Cambridge Global Payments in Toronto.
    Earlier, the yen and Swiss franc rose against the dollar, after Moderna's (MRNA) CEO said the coronavirus
vaccines will likely be less effective against the Omicron variant as they have been against other variants.
    Adding to the fears, drugmaker Regeneron Pharmaceuticals Inc (REGN) said on Tuesday its COVID-19
antibody treatment could be less effective against Omicron.
    The warnings reinforced a view that the global economy could take longer to return to pre-pandemic
levels than many had been expecting.
    Against the U.S. dollar, the euro rose 0.4% to$1.1335, posting its biggest three-day rising
streak since December 2020.
    Prior to Omicron's arrival, the main driver of currency moves was how traders perceived the different
speeds at which global central banks would end pandemic-era stimulus and raise interest rates as they looked
to combat rising inflation without choking off growth.
    Cryptocurrencies also had a volatile trading session. Ethereum was last up 4.8% at $4,668
. Bitcoin was down 0.3% at $57,645.

    Currency bid prices at 4:11PM (2111 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 95.8590        96.1990     -0.34%         6.532%        +96.6470    +95.5440
 Euro/Dollar                  $1.1340        $1.1293     +0.44%         -7.17%        +$1.1387    +$1.1235
 Dollar/Yen                   113.0350       113.5300    -0.45%         +9.38%        +113.8900   +112.5350
 Euro/Yen                     128.19         128.19      +0.00%         +1.00%        +128.6000   +127.6500
 Dollar/Swiss                 0.9181         0.9227      -0.49%         +3.78%        +0.9266     +0.9158
 Sterling/Dollar              $1.3306        $1.3318     -0.06%         -2.58%        +$1.3370    +$1.3195
 Dollar/Canadian              1.2775         1.2738      +0.29%         +0.32%        +1.2837     +1.2732
 Aussie/Dollar                $0.7130        $0.7143     -0.19%         -7.32%        +$0.7170    +$0.7063
 Euro/Swiss                   1.0411         1.0418      -0.07%         -3.66%        +1.0444     +1.0391
 Euro/Sterling                0.8520         0.8477      +0.51%         -4.67%        +0.8538     +0.8474
 NZ                           $0.6827        $0.6825     +0.02%         -4.94%        +$0.6856    +$0.6773
 Dollar/Norway                9.0360         9.0455      -0.12%         +5.21%        +9.1260     +9.0080
 Euro/Norway                  10.2458        10.1786     +0.66%         -2.11%        +10.3158    +10.1737
 Dollar/Sweden                9.0179         9.0594      -0.06%         +10.02%       +9.1103     +9.0069
 Euro/Sweden                  10.2270        10.2336     -0.06%         +1.49%        +10.3036    +10.2077


In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.