Dollar firm but risk

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - The dollar edged higher against a basket of currencies on Thursday, but its gains were capped as easing fears of fallout from the Omicron coronavirus variant supported higher risk currencies such as the Australian dollar and British pound.

Ahead of the holidays and extended long weekend in the United States, most major currency pairs clung to narrow ranges.

"We think the majors are liable to remain more or less range bound over the holidays," Shaun Osborne, chief FX strategist at Scotiabank, said in a note.

The dollar index, which measures the greenback against six major peers, was up 0.07% at 96.174. The index remains close to the 16-month high hit late last month.

Upbeat news on the vaccines and omicron-related hospitalizations helped boost investors' appetite for risk, lifting stocks and pushing U.S. Treasury yields higher.

Two vaccine makers said their shots protected against Omicron as UK data suggested it may cause proportionally fewer hospital cases than the Delta coronavirus variant, though public health experts warned the battle against COVID-19 was far from over.

Separately, data on Thursday showed the number of Americans filing new claims for unemployment benefits held below pre-pandemic levels last week, while consumer spending increased solidly, putting the economy on track for a strong finish to 2021.

But price pressures continued to build up, with a measure of underlying inflation recording its largest annual increase since 1989 in November.

The Australian dollar rose 0.35% to $0.72405. The Norwegian crown rose about 0.6% to a one-month high against the dollar, boosted by soaring oil and gas prices.

Sterling rose to 0.4% against the dollar benefiting from the reassuring reports on the Omicron variant and a move higher in Britain's short-dated government bond yields.

Elsewhere, the Turkish lira extended its startling rebound this week, rising another 6% at 11.3 per dollar, having traded as weak as 18.4 on Monday.

The big gains came after President Tayyip Erdogan said the government and central bank would guarantee some local currency deposits against FX depreciation losses.