Dollar Falters on Tax Bill Wrangling

The dollar steadied itself on Friday after arguing over a bill aiming to change the US tax code dented confidence.

paper bills

The greenback slid 0.2 percent at 112.170 yen, dropping to an eight-day low of 112.065 overnight.

The USD was able to reach its one-month high at 113.750 yen on Tuesday.  However, after the Federal Reserve’s tightening on the monetary policy, the currency made a complete U-turn. The Fed’s decision was expected but it also expressed concerns regarding low inflation.

The dollar slipped further after two US Republican senators were said to have tried altering the proposed legislation of overhauling the US tax code on Thursday.

“Negotiations tend to last until the last minute in these kind of situations. So it is not surprising, especially as those seeking changes to the bill were likely emboldened by the Republican’s defeat at Alabama,” said senior strategist Shin Kadota.

The tax bill only needs a simple majority for it to pass in the senate. There are 52 Republicans of the 100 seats and it’s expected that no Democrat will be supporting it.

Doug Jones, a Democrat was able to win the contest for a US senate seat on Tuesday in Alabama. The state was a Republican stronghold, the loss trimmed the Republicans’ already narrow Senate majority.

“The overall process of overhauling the tax bill is not in peril. That said, even if the tax bill is passed and becomes law, the positive impact on the dollar could be limited as the market has already priced in such a scenario for the most part,” Kadota stated.

Euro Falls

On the other hand, euro dipped following the European Central Bank’s signal that stimulus will be maintained until needed.

The common currency was little changed at $1.1787 after it lost around 0.4 percent overnight.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, steadies at 95.523 as a result. It was able to get back up from an eight-day low of 93.982 recorded overnight. It was headed for a 0.3 percent weekly loss.

The pound rose slightly by 0.1 percent to $1.3442, staying away from a two-week low of $1.3303 set on Tuesday.

The Australian dollar was a bit higher at $0.7672, almost reaching a five-week high of $0.7680 fixed on Thursday. The rise was attributed to an upbeat domestic employment report.

The New Zealand dollar rose 0.2 percent at $0.6997 following the statement of finance minister Grant Robertson. He said that he was at ease with the currency’s general trend.

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