Forex Today: US Dollar benefits from risk aversion

Here is what you need to know on Thursday, December 29:

The negative shift witnessed in risk mood helps the US Dollar holds its ground against its major rivals in the second half of the week. The US Dollar Index stays near 104.50  after having closed the previous two days in positive territory and US stock index futures trade mixed in the early European session on Thursday. Weekly Initial Jobless Claims and crude oil inventory data will be featured in the US economic docket. Market participants will keep a close eye on developments surrounding the Russia-Ukraine conflict and the coronavirus situation in China.

Late Wednesday, Wall Street's main indexes turned south and suffered heavy losses, providing a boost to the safe-haven US Dollar. While China continues to move closer to a full reopening, the rest of the world is looking to introduce new restrictions on travellers from China. Effective January 5, the US will require all travellers from China to provide a negative COVID test before entering the country. Similarly, Italy announced that they will commence testing on all arrivals from China after half of the passengers that arrived in Milan had reportedly had COVID. The UK is expected to assess the situation and decide whether non-stop inbound flights from China will be restricted.

Meanwhile, Kyiv's mayor Vitali Klitschko said on Thursday that there were explosions in the city. Additionally, Russian missile strikes have reportedly hit the eastern Ukrainian city of Kharkiv. Additionally, Russia's Foreign Minister Sergei Lavrov reiterated that they will not negotiate with Ukraine based on Ukrainian President Volodymyr Zelenskiy's 'peace formula.'

EUR/USD retreated toward 1.0600 and closed in negative territory on Wednesday. The pair stays relatively quiet slightly above that level early Thursday. M3 Money Supply and Private Loans data will be featured in the European economic docket.

GBP/USD registered modest losses for the second straight day on Wednesday but managed to hold above 1.2000. At the time of press, the pair was marginally higher on the day at around 1.2020.

After having closed the first three days of the week in positive territory, USD/JPY reversed its direction during the Asian trading hours on Thursday. Reuters reported earlier in the day that the Bank of Japan conducted an unplanned bond-buying for the second straight day. The pair was last seen losing 0.5% on the day at 133.80.

Following Tuesday's rally, Gold price stayed on the back foot amid risk aversion on Wednesday. Nevertheless, XAU/USD doesn't seem to be having a difficult time staying afloat above $1,800 early Thursday with the benchmark 10-year US Treasury bond yield losing nearly 1% at around 8.5%.

Bitcoin lost nearly 1% for the second straight day on Wednesday before going into a consolidation phase near $16,500 early Thursday. Ethereum fell nearly 2% and closed below $1,200 on Wednesday. ETH/USD was last seen trading modestly higher on the day at $1,190.