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LONDON  - The euro surged on Tuesday and is on track for its biggest three-day rising streak this year as traders cut their short positions on the single currency after Moderna's CEO said COVID-19 vaccines are unlikely to be as effective against the Omicron variant as they have been with other types.

Risk appetite took a battering across all markets for a second day in less than a week after his comments reinforced expectations that the global economy is set for a rocky and longer return to normalcy path in the following months.

That was most evident in the jump in the value of the single currency on Tuesday as traders rushed to cut their large short bets on bets the U.S. Federal Reserve will raise interest rates quicker than its global peers next year.

"This is Round 2 of Omicron jitters evident in the unwinding of short euro/long stock positions," said Kenneth Broux, an FX strategist at Societe Generale in London.

"There is an element of short euro covering as well and the unwinding of U.S. rate hike bets is also undermining the dollar."

Money markets pushed back their expectation of a first, full 25 basis-point rate hike to September 2022, versus July last week.

Against the U.S. dollar, the euro surged 0.6% on Tuesday at $1.1367 and is up 1.4% in the last three sessions, its biggest three-day rising streak since December 2020.

The Japanese yen climbed 0.6% versus the dollar to its highest levels since early October at 112.68 yen.

"Market participants’ fears over a more disruptive outcome for the global economy have been reinforced overnight by comments from Moderna Inc. CEO," Mizuho strategists said in client note.

Unwinding of popular carry trades in the currency markets were the theme in London trading with the Aussie tanking 0.8% versus the Swiss currency while the franc held within striking distance of a July 2015 low against the euro.

"There is no world, I think, where (the effectiveness) is the same level . . . we had with Delta," Moderna Chief Executive Stéphane Bancel told the Financial Times in an interview.

The Australian dollar slid 0.65% to a new 12-month month low of $0.7093, and the New Zealand dollar lost 0.6% to $0.6783 after the interview was published, heading for its worst month since May, 2015.

Prior to Omicron's arrival, the main driver of currency moves was how traders perceived the different speeds at which global central banks would end pandemic era stimulus and raise interest rates as they looked to combat rising inflation without choking off growth.