Dollar stalls due to uncertainty over US tax reforms and direction of the Federal Reserve
The dollar stumbled against a basket of currencies on Monday, giving up some recent gains as uncertainties related to proposed US tax revisions and the future composition of the Federal Open Market Committee discouraged traders from bidding the US dollar higher.
The dollar index, which tracks the US dollar against six major currencies, was down 0.19 per cent at 94.764. The index has risen nearly 3 per cent since mid-September.
The dollar was 0.31 per cent lower against the Japanese yen, and the euro was down 0.03 per cent against the US dollar.
“The dollar rally has kind of stalled here a little bit,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
Uncertainty around the proposed US tax reform and lack of clarity on what the FOMC is going to look like going forward, are among the reasons keeping investors from turning more bullish on the dollar, Trang said.
House Republicans last week unveiled the first draft of legislation that, if enacted, would revamp the US tax system the most since the 1980s.
The House tax-writing panel, the Ways and Means Committee, begins revising the bill on Monday, with tweaks and some more substantial changes expected to a number of individual and corporate tax proposals.
On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.
That raised another question over leadership at the US central bank less than a week after President Donald Trump chose a new Fed chief.
“Until we see a little bit more certainty the dollar is a little bit gun-shy at this point,” Trang said.
Sterling rose 0.73 per cent against the dollar, rebounding from a one-month low hit after the Bank of England raised its lending rate for the first time in a decade last Thursday but forecast only gradual tightening ahead.
The Canadian dollar was slightly stronger against its US counterpart. Prices of oil, one of Canada’s major exports, reached their highest since July 2015 as Saudi Arabia’s crown prince cemented his power over the weekend through an anti-corruption crackdown.
Latin American currencies rebounded from the previous week’s sell-off as rising prices of basic products drove investors to hunt for bargains. The US dollar slipped 0.82 per cent against the Mexican peso.