The dollar dipped against a basket of major currencies on Monday amid doubt whether a proposed US tax reform programme would have a major impact on economic growth, after the bill moved another step closer to ratification over the weekend. The US currency had edged higher after Republicans on the House-Senate negotiating committee on Friday put the finishing touches to a sweeping tax overhaul that involves large cuts in levies on corporations.
But it dipped on Monday on some uncertainty that the bill would indeed be pushed through, and with some doubts creeping in over the pro-growth effect the tax reforms would have. "The market doesn't expect the legislation to have a major impact on US growth outlook," said Alvin Tan, a strategist at Societe Generale in London.
Year-end demand for dollars had helped push the greenback up against the euro in recent sessions, added Tan, but that had slowed on Monday, adding to pressure on the dollar. Against a basket of major currencies, the dollar edged down 0.3 percent to 93.678. The euro benefited from the dollar's weakness, gaining 0.4 percent to $1.1794. Top Republicans are confident Congress will now pass the tax bill this week, with a Senate vote as early as Tuesday and President Donald Trump aiming to sign the bill by week's end.
The dollar was 0.1 percent lower at 112.52 yen following Friday's rise of 0.2 percent. Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo, said another moderate political risk to the dollar was the possibility of a US government shutdown if a spending deal does not get successfully extended beyond December 22.
"While the tax bill is likely to be passed and a government shutdown is also likely to be averted, both these concerns have to be assuaged before the dollar can rise," Yamamato said. The dollar also failed to get support from subdued US Treasury yields. The long-term Treasury yield has been confined to a narrow 2.34-2.42 percent range over the past week.
"As long as US yields don't climb higher, the dollar cannot mount a sustained rise. The market only sees the Federal Reserve raising rates about twice next year, rather than the three hikes the Fed projected," said Koji Fukaya, president of FPG Securities in Tokyo. Bitcoin was up 1 percent at $19,190 on the Bitstamp exchange. It rose to a record high of $19,666 on Sunday, ahead of the launch of bitcoin futures from CME Group Inc.