The Australian and NZ dollars weakened against their major counterparts in the Asian session on Tuesday, as risk sentiment dampened following comments from Moderna Chief Executive Officer Stephane Bancel that existing vaccines would be much less effective to combat the omicron coronavirus strain.

In an interview with the Financial Times, Bancel said that the high number of mutations on the spike protein and the rapid spread of the variant in South Africa indicated that the current vaccines may need to be modified next year.

The pharmaceutical companies could take months to develop and distribute vaccines in large numbers to resist the new strain.

U.S. President Joe Biden said on Monday that the Omicron variant is a cause for concern, but not a cause for panic and urged people to get fully vaccinated.

Biden dismissed concerns over economic lockdowns to curb the Omicron variant.

In prepared testimony before the Senate Banking Committee, Federal Reserve Chair Jerome Powell said that the new strain clouded the economic outlook and price pressures could last longer than earlier estimate.

The variant poses downside risks to employment and economic activity and increased uncertainty for inflation, he added.

The aussie dropped to more than a 1-year low of 0.7093 against the greenback, near 2-month lows of 80.18 against the yen and 1.5949 against the euro, off its early highs of 0.7155, 81.39 and 1.5788, respectively. The aussie is poised to find support around 0.68 against the greenback, 78.00 against the yen and 1.62 against the euro.

The aussie retreated from an early high of 1.0484 against the kiwi, with the pair trading at 1.0455. The aussie is seen finding support around the 1.03 level.

The aussie declined to 0.9078 against the loonie after the news, but it has since rebounded to 0.9112. At yesterday's close, the pair was worth 0.9096.

The kiwi weakened to more than a 1-year low of 0.6781 against the greenback, near 2-month low of 76.66 against the yen and a 1-1/2-month low of 1.6683 against the euro, following its prior highs of 0.6835, 77.78 and 1.6522, respectively. On the downside, 0.66, 74.00 and 1.69 are possibly seen as the next support levels for the kiwi against the greenback, the yen and the euro, respectively.

Looking ahead, Swiss KOF leading index, German jobless rate and Eurozone flash inflation for November are scheduled for release in the European session.

Canada GDP data for the third quarter, U.S. FHFA's house price index and S&P/Case-Shiller home price index for September and consumer confidence index for November will be featured in the New York session.

Federal Reserve Chair Jerome Powell will testify on the CARES Act, along with Treasury Secretary Janet Yellen before the Senate Banking Committee in Washington DC at 10:00 am ET.

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