The dollar showed weakened performance on Friday, putting it on track for weekly losses. This followed a drop due to disappointments over a tax bill that US Senate Republicans proposed. The tax bill should have delayed expected corporate tax cuts.
The dollar index, which measures the dollar against six major currencies, was nearly flat on the day. It was at 94.483 after slipping 0.36 percent during the previous session. For the week, it fell 0.5 percent.
Against the yen, the greenback dropped 0.1 percent to 113.40 yen. For the week, it dropped 0.6 percent. This ranked well below its eight-month high of 114.737, which was logged on Monday.
Meanwhile, the euro hovered 0.1 percent to $1.1650, or 0.4 percent higher for the week. It is currently holding well above a 3-and-a-half-month low of $1553, which was recorded on Tuesday.
This rise followed the European Commission’s upward revision of growth forecast in the euro zone this year. However, the bank lowered next year’s growth estimates.
Another factor that pulls the dollar down was the reported weakness in the labor market. This followed the more-than-expected-rise in initial jobless claims last week.
“I’ve been warning that November is a dangerous month for the dollar,” said Mitsuo Imaizumi, chief foreign exchange strategist for Daiwa Securities.
Imaizumi added that funds that close their books this month could take profits on dollar-long positions. Apart from that, they could also earn on their holdings of US stocks. He indicated that the US tax plan details could offer them excuses to sell.
US yields went higher and underpinned the dollar at 2.338 percent, compared with its Thursday US close of 2.331 percent. Yields plunged amid uncertainties surrounding the tax reform. However, they perked up again as this week’s government and corporate debt supply pressured them.
The Australian dollar and its US counterpart traded at 0.7678, falling 0.03 percent.
Differences between the Senate Republicans' tax bill and their House counterparts’ version exhibited themselves recently.
The House’s version, like the Senate's, proposes to cut the corporate tax rate to 20 percent, down from 35 percent. However, the Senate’s plan would delay the implementation until 2019.
Moreover, both versions plan to impose a tax on $2.6 trillion in foreign profits, which US multinationals hold. The Senate pushes for a 12-percent tax for cash and liquid assets, and a 5-percent tax for non-liquid assets.
However, the House amended its bill on Thursday, making the rates 14 percent and 7 percent respectively.
Both bills would pour $1.5 trillion over a decade to the US budget deficit and national debt. In the past, this would likely have faced scrutiny from Republicans.
Australian Central Bank Cuts Core inflation Forecast
The Australian central bank expressed an unfriendly view on inflation prospects, causing their currency to slip against the dollar.
The central bank cut its core inflation forecast, which it expected at first to hit a 2-percent-to-3-percent target band until 2019. This suggests a strong signal that rates won’t rise for a long time.
“Inflation and wage growth remain low. Both are expected to increase only gradually over time,” said Governor Phil Lowe.
“Important uncertainties influencing the outlook for inflation include questions of how much wage growth might pick up as the labor market tightens, and how quickly the resulting increase in labor costs might feed into inflation,” he added.
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