Dollar takes breather after rally; focus on Trump tax plan, Fed outlook
The dollar inched higher against a basket of major currencies on Friday, having pulled back from one-month highs set this week as investors pondered the Trump administration's tax plan and the outlook for Federal Reserve policy.
For the week, the dollar index has gained 1.1 percent, putting it on track for its biggest weekly gain since December.
The dollar rose this week on renewed hopes for U.S. tax reforms, as well as comments from Federal Reserve Chair Janet Yellen that stressed the need for gradual interest rate hikes.
Traders are probably taking profits in the wake of the dollar's rally, said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.
"It's also the realization that we've been down this tax reform road before, and I don't think it's going to be easy... There's going to be a lot of back and forth, a lot of squabbling," Innes added.
U.S. President Donald Trump proposed on Wednesday the biggest U.S. tax overhaul in three decades, calling for tax cuts for most Americans.
Against the yen, the dollar edged up 0.2 percent to 112.57 yen
Later on Friday, investors will turn their focus to U.S. economic data including the personal consumption expenditures (PCE) price index for August.
The euro held steady at $1.1786
The common currency has rallied 12 percent against the dollar so far this year as worries about the rise of anti-establishment political forces in Europe faded while expectations rose for tapering the European Central Bank’s stimulus.
The euro, however, has been weighed down this week after the results of elections in Germany on Sunday. Chancellor Angela Merkel won a fourth term in office but will have to build an uneasy coalition to form a government.
Sterling eased 0.1 percent to $1.3425