The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump's tax reform plans. US House of Representatives Speaker Paul Ryan on Wednesday left the door open to a possible delay in implementing a huge corporate tax cut, following a Washington Post report that his fellow Republicans in the Senate are exploring the option.
Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the US currency, analysts said. "Anyone who has been long the dollar has been really vulnerable to headlines. We have seen a lot of traders leave the party on any sort of inkling of bad news," said Lennon Sweeting, chief market strategist at XE in Toronto.
The dollar was down 0.19 percent to 113.78 yen, after having fallen as low as 113.4 yen, earlier in the session. The dollar index, which tracks the greenback against six major currencies, was down 0.04 percent at 94.875. "I think it is to do with uncertainty surrounding the path towards tax reform," said Vassili Serebriakov, FX Strategist at Credit Agricole in New York.
"In terms of data, it is very quiet this week. The December (interest rate) hike is fully priced in but there is a lot of uncertainty about next year, especially with the composition of the FOMC," he said, referring to US central bank's policy-setting Federal Open Market Committee. 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 central bank, less than a week after Trump chose a new Fed chief. "It is difficult for markets to trade the Fed at the moment, so that kind of leaves most of the focus on tax reform," Serebriakov said. The British pound weakened against the dollar, weighed down by a spiraling political drama in Westminster and growing doubts over Prime Minister Theresa May's ability to deliver a good Brexit deal. The Canadian dollar strengthened against its US counterpart, adding to its gains after comments by Bank of Canada Governor Stephen Poloz the day before that were less dovish than investors had expected.
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