The US dollar eased on Friday ahead of the new year, but remained on track for its biggest annual gain since 2015, on the last trading day of a year driven by a Federal Reserve rate hike and concerns about a sharp slowdown in global growth.
Asian equities rose early in the session after market sentiment on Wall Street got a boost on Thursday from data showing a rise in US jobless claims, which suggested a Fed interest rate hike to ease demand for labour.
The US dollar index fell 0.08% to trade at 103.50 against six major currencies.
The US Federal Reserve has raised rates by 425 basis points since March in an effort to curb high inflation. Against a basket of currencies, the US dollar has risen around 8.4% so far in 2022, its biggest annual jump in seven years. However, the US dollar has started to pare some of its gains in recent weeks as investors expect the Fed's rate hike cycle to end next year.
Elsewhere, the Euro strengthened 0.2% to trade at $1.0681, on track for a 6.2% annual loss against the dollar. But it is better than last year's 7% drop. A combination of weak eurozone growth, the war in Ukraine, and the Fed's hawkish stance has put the euro under pressure this year.
European Central Bank policymaker Isabel Schnabel said last week that the central bank must be prepared to raise interest rates further, including more than market expectations, if that is needed to lower inflation.
The British pound fell 0.1%, set for an 11% annual decline. The Australian dollar, seen as a proxy for risk appetite, was up 0.3% on the day at $0.6796, but is on track for a 6.5% decline for the year as a whole.
Optimism about China's reopening after three years of strict Covid-19 restrictions has been dampened by rising infections that threaten further economic disruption.
The United States, South Korea, India, Italy, Japan and Taiwan have all imposed Covid-19 tests from China. The World Health Organization says it needs more information to assess the latest spike in infections.
The Bank of Japan's ultra-dovish stance has seen the dollar rise 14.5% against the yen so far this year, in its worst performance since 2013. But the Bank of Japan's surprise decision to tweak its bond yield control program pushed the yen to a four-month high against the U.S. dollar. in early December.
