Dollar index hits 3-week high on hopes of US tax cuts
New York (Feb 13) The dollar rose to a near three-week high against a basket of currencies on Monday, lifted by hopes of U.S. tax cuts to stoke corporate profits and investments as well as bets on whether the Federal Reserve might raise interest rates more quickly.
The greenback last week booked its strongest gain since mid-December after U.S. President Donald Trump on Thursday promised a "phenomenal" tax plan that the White House said would include tax cuts for businesses and individuals. Investors hope that signals that the focus of day-to-day remarks by Trump and his aides is shifting away from trade protectionism and security, and toward economic growth.
"People seemed to be more comfortable with the fiscal policy outlook. It's been friendly for stocks and also for the dollar," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Group Ltd in New York.
The dollar index, which measures the greenback against six other currencies, reached 101.07, its strongest level since Jan. 20. It was last up 0.2 percent at 101.04. The dollar advanced to a two-week peak against the yen following reports that Trump did not even discuss the currency or its strength during weekend talks with visiting Japanese Prime Minister Shinzo Abe. It was last up 0.7 percent at 113.94 yen . The outcome of their meeting was an affirmation for Japan in the face of challenges such as China's maritime expansion and North Korea's nuclear weapons and missile development. Investors are also focused on testimony by Fed Chair Janet Yellen before Congress on Tuesday and Wednesday in the wake of hints from other policy-makers who are leaning toward more hikes in interest rates this year than the two currently priced in by markets prompted by signs of looser fiscal policies. "Markets are pricing only a 22 percent probability of a March Fed move, the question is whether she wants to nudge it closer to 50 percent," said Nick Parsons, head of currency strategy at National Australia Bank in London.
Source: Reuters
