Dollar looking at its biggest weekly loss in more than a month as focus on US tax legislation

PUBLISHED : Saturday, 18 November, 2017, 7:42am
UPDATED : Saturday, 18 November, 2017, 7:45am

The dollar held near the day’s lows against a trade-weighted basket of its rivals on Friday and is set for its biggest weekly loss in more than a month as investors locked in gains while awaiting progress on a landmark US tax bill.

Congressional Republicans took an important step toward the biggest US tax-code overhaul since the 1980s, with the House of Representatives approving a broad package of tax cuts, and a Senate panel advancing its own version of the legislation sought by senior lawmakers and President Donald Trump.

“We are seeing a very choppy ending to the week on the dollar with market liquidity thinning out and the key to more dollar upside lies in the progress of the US tax bill,” said Alvin Tan, an FX strategist at Societe Generale in London.

The euro held around the US$1.18 line against the dollar and held just below US$1.1862 tested on Wednesday.

Against a broad trade-weighted basket of its rivals, the dollar was down 0.3 per cent to 93.508 and was set for a second consecutive week of losses.

The US dollar also came under pressure after a Wall Street Journal report that investigators probing possible Russian interference in the 2016 US election had subpoenaed President Donald Trump’s election campaign for documents.

With very little in the way of top tier data out of US in the coming days, investors will be focused on the Fed minutes, according to an ING report. Market action is likely to be muted next week due to the Thanksgiving holiday.

Also weighing on the dollar was a return in risk appetite in the second half of the week with a broad swathe of emerging market currencies led by the Indian rupee which is up nearly half a per cent.

Peter Fitzgerald, global head of multi-assets at Aviva Investors, who oversees 132 billion pounds (US$174.20 billion) in assets, said that going long large-cap emerging equities and short on large-cap developed market stocks had done reasonably well in 2017, and would continue to make money next year.