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​·                Asian currencies weaken as hawkish Fed comments sour risk appetite

Riskier Asian currencies like the Philippine peso , Thai baht and the Indonesian rupiah fell between 0.2% and 0.3%.

The dollar got additional support from bullish comments by Federal Reserve officials Richard Clarida and Christopher Waller on Friday who suggested a faster pace of stimulus tapering may be appropriate amid a quickening recovery and heated inflation.

·                Dollar solid, euro suffers on growing concerns about Europe's COVID situation

The safe-haven U.S. dollar traded close to a 16-month high to the euro on Monday on growing anxiety over the impact of surging COVID-19 infections in Europe, with Austria reimposing a full lockdown and Germany considering following suit.

The greenback was near its strongest since early October against the riskier Australian and Canadian dollars, with the commodity-linked currencies also pressured by a slump in crude oil.

A more rapid end to tapering raises the possibility of earlier interest rate increases too. Currently the market is priced for the Federal Open Market Committee (FOMC) to start hiking rates by the middle of next year.

The dollar index , which gauges the currency against six major peers, traded little changed at 96.148, staying within sight of last week's 16-month high of 96.266.

The euro slumped 0.25% to $1.12705 -- the 16-month low hit on Friday.

·                Europe has again become the epicentre of the pandemic, accounting for half of global cases and deaths.

A fourth wave of infections has plunged Germany, Europe's largest economy, into a national emergency, Health Minister Jens Spahn said, warning that vaccinations alone will not cut case numbers.

Worries that a slowdown in Europe could hit energy demand dented crude oil, which was also in retreat over the prospect of a U.S.-led release of emergency stockpiles.

·                The minutes of the FOMC's meeting at the start of this month, when policymakers announced a start to tapering, are due Wednesday and may provide more insight on how many Fed officials are considering faster tapering or earlier rate increases.

·                U.S. President Joe Biden is also likely to announce his nominee for Fed chair this week, after interviewing incumbent Jerome Powell and Fed governor Lael Brainard.

"Governor Brainard is more dovish and her nomination could prompt some kneejerk USD selling," Westpac strategists wrote in a note.

 

Reference: Reuters