Dollar slips as risk sentiment improves, Aussie outperforms

NEW YORK, Dec 22 (Reuters) - The euro, Australian dollar and other currencies recovered against the U.S. dollar as traders turned more positive about the economic outlook on Wednesday, even as Omicron cases rocketed and investors braced for more volatility.

Risk appetite has improved since Monday, when markets were rattled by government restrictions relating to the spread of Omicron, and after U.S. Senator Joe Manchin said he would not support a new fiscal spending package. read more

"The dollar is softening as risk-off impulses continue to ebb," analysts at Brown Brothers Harriman said in a report on Wednesday, adding that "we are likely in a consolidative period for now given the lack of any major new drivers."

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The dollar dipped 0.37% against a basket of currencies to 96.068.

The dollar index, however, remains near a 1-1/2-year high of 96.938 reached on Nov. 24, on expectations that the Federal Reserve is closer to raising rates.

Data on Wednesday showed that U.S. consumer confidence improved further in December, suggesting the economy would continue to expand in 2022 despite a resurgence in COVID-19 infections and reduced fiscal stimulus. read more

The euro gained 0.37% to $1.1331 .

The risk sensitive Australian dollar gained 0.86% to $0.7214 and the kiwi rose 0.74% to $0.6820.

The greenback dipped 0.63% against the Norwegian crown to 8.8800. The Norwegian currency has benefited from rising oil and gas prices and has a positive seasonality for the weeks around Christmas.

Sterling gained 0.67% to $1.3358 , despite data showing Britain's economy grew more slowly than previously thought in the July-September period. read more

The weeks on either side of Christmas are typically low in volatility for currencies and other asset classes, analysts at ING said, though "this year some seasonal tendencies will be mixed with the Omicron variant threatening to force new restrictions and markets still processing a week full of key central bank decisions."

Turkey's lira steadied and held its recent gains after a rollercoaster ride in which it charged back from record lows due to President Tayyip Erdogan's new steps to guard Turks' savings against volatility. read more

Bitcoin was little changed on the day at $48,914.


Currency bid prices at 3:00PM (2000 GMT)

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Additional reporting by Tommy Wilkes in London; Editing by Alison Williams and Cynthia Osterman

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