By Peter Nurse

Investing.com - The dollar edged higher Thursday, but remained on the back foot as risk appetite remained strong on positive news surrounding the likely economic damage caused by the Omicron Covid variant.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.2% to 96.037, some way below the year’s high of approaching 97 seen at the end of November.

USD/JPY fell 0.1% to 113.53, EUR/USD slipped 0.2% to 1.1324, just below a one-week high, and the risk-sensitive AUD/USD gained 0.1% to 0.7176, just off its weekly high.

GBP/USD dropped 0.1% to 1.3203, after falling to a 2021 low on Wednesday after U.K. Prime Minister Boris Johnson imposed tougher Covid-19 restrictions in England, ordering people to work from home and wear masks in public places. Social gatherings will still be allowed, however. It has been politically impossible to restrict them due to public outrtage over a party held last Christmas by staff at 10 Downing Street in defiance of the government's own social distancing rules

Despite this news out of England, risk-friendly currencies have seen demand this week following indications that the worst fears associated with the new Covid variant may not be realised.

Pfizer (NYSE:PFE) said on Wednesday that three doses of its Covid-19 vaccine, developed with BioNTech, neutralised the new Omicron variant in a laboratory test, indicating that booster shots could be key to protection against infection.

"We have highly effective vaccines that have proved effective against all the variants so far, in terms of severe disease and hospitalisation, and there's no reason to expect that it wouldn't be so" for Omicron, Mike Ryan, the World Health Organisation's emergencies director said Wednesday.

With the uncertainty surrounding the Omicron variant beginning to dissipate, attention is turning back to central banks and how they tackle the conflict between confronting high inflation and ensuring growth continues.

The Federal Reserve is still widely expected to announce it will accelerate tapering of its bond-buying program at its meeting next week, but last week’s nonfarm payrolls release disappointed.

Traders will likely keep a watchful eye on the release of the latest weekly U.S. jobless claims data, at 8:30 AM ET (1330 GMT), the most up-to-date gauge of the strength of the country’s labor market.

Elsewhere, USD/CAD rose 0.1% to 1.2659 after the Bank of Canada held its key overnight interest rate at 0.25% on Wednesday, as expected, and maintained its guidance that a first hike could come as soon as April 2022.