Tuesday, 5 December 2017

Dollar holds modest gains, rise slows with next phase in tax saga awaited

TOKYO (Reuters) - The dollar held on to modest gains against its peers on Tuesday, with its rise made at the week’s start slowing as the market awaited the next phase of the U.S. tax reform saga for cues.

The dollar was a shade higher at 112.500 yen.

The greenback had climbed to a 2-1/2-week high of 113.090 the previous day, boosted by the U.S. Senate’s approval of the U.S. tax bill over the weekend.

But it was unable to remain above the 113.000 yen threshold. The Senate must now reconcile its version of the bill with legislation passed by the House of Representatives, a process that could face a few speed bumps along the way.

“A large portion of the enthusiasm for the tax bill passing the Senate had already been factored in when (Republican Senator John) McCain gave his endorsement last week,” said Shin Kadota, senior strategist at Barclays in Tokyo, explaining the dollar’s loss of momentum.

“The upcoming negotiations on the bill between the Senate and the House are likely to decide the dollar’s direction this week.”

The euro was steady at $1.1867 after losing 0.3 percent overnight.

The dollar index against a basket of six major currencies was little changed at 93.113 after gaining about 0.3 percent the previous day.

The pound was little changed at $1.3474 after wide swings the previous day.

Sterling initially spiked to $1.3538 on Monday on hopes that divorce talks between Britain and the European Union would make headway. But it slumped to $1.3415 after European Commission President Jean-Claude Juncker and British Prime Minister Theresa May failed to reach an agreement.

The Australian dollar nudged up 0.1 percent to $0.7603.

The Aussie awaited the Reserve Bank of Australia’s interest rate decision later in the session. Analysts polled by Reuters expected the RBA to keep its cash rate at a record low of 1.5 percent.

The New Zealand dollar climbed 0.1 percent to $0.6866 after dropping 0.4 percent on Monday.

Reporting by Shinichi Saoshiro

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