The U.S. Dollar moved up on Wednesday as Euro-Dollar volatility hit a 2021-high over concerns relating to the Omicron variant, whilst the Dollar found support in fresh rate hike expectations.

The Dollar index increased 0.03% to 95.997 following its strongest month since June, despite the volatility sparked by the latest Covid variant.

Volatility in the Euro/Dollar reached its highest of the year on Wednesday with the Euro hitting a fortnight-high on Tuesday before falling as the Dollar gained ground.

"Realised one-month EUR/USD volatility has spiked to the highest levels of the year as fears over Omicron, but hawkish comments from Fed Chair Powell throws the Dollar around," according to ING.

Federal Reserve chair Jerome Powell indicated the U.S. central bank may accelerate the pace of its bond-buying tapering at its December meeting. In addition, he said it was time to stop defining price pressures as transitory.

"This means that the Fed sees inflation not only temporarily, but in the long term at an elevated level, which in turn implies interest rate hikes by the Fed," according to Moritz Paysen, FX trader at Berenberg.

Moreover, the Euro dropped 0.1% against the Dollar to $1.1325.

Earlier this week, a caution from drug manufacturer Moderna that current vaccines will unlikely be as effective against the new variant as other strains, led to a spike in interest in less risky assets, Reuters reports.

Elsewhere the Pound moved up 0.15% to $1.3318 after dropping to its lowest point since December the day before, highlighting concern over whether the vaccine will be effective against the new variant.

Furthermore, both the Australian and New Zealand Dollars rose on Wednesday, following one-year lows. The Australian Dollar hit $0.7148, whilst the New Zealand Dollar was trading at $0.6844.