Dollar Gains Further On Yen With Senate Tax Cut Effort, US Politics Eyed
The dollar posted further gains against the yen in Asia on Monday as prospects for US tax cuts supported the greenback though the ongoing special counsel investigation into Russian meddling in the 2016 election cast a shadow over markets.
USD/JPY changed hands at 112.78, up 0.53%, while AUD/USD traded at 0.7596, down 0.22%. EUR/USD was last quoted down 0.21% to 1.1871 as British PM Theresa May gears for an important meeting with the EU on Brexit terms.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last quoted down 0.17% to 92.81.
This week, interest rate reviews in Australia and Canada will be closely watched.
Senate Republicans narrowly passed a bill to overhaul the U.S. tax system in the wee hours of Saturday. The GOP still needs to overcome significant differences for the House and Senate to craft a joint bill in a process called resolution and send it to Trump's desk. Republicans hope to reach a deal by Christmas.
Goldman Sachs (NYSE:GS) said the Senate version led it to revise growth forecasts.
"We have increased our estimate of the growth effects of the legislation slightly, to around 0.3pp in 2018 and 2019," Goldman said in a note to clients.
"This reflects the slightly larger amount of tax cuts in the Senate plan following revisions, and our expectations regarding the eventual compromise."
ABC News reported on Friday that Michael Flynn, the former White House national security advisor, would testify that he was directed to make contact with Russians during the presidential campaign in 2016. Flynn pleaded guilty to lying to the FBI about his post-election contacts with Russia's ambassador to the U.S.
The ABC report was later corrected the story to say its source had clarified that Trump gave Flynn the directive "shortly after the election" to discuss strategies for fighting the Islamic State extremist group.
Overnight, the dollar ended lower on Friday as investors weighed concerns over heightened political uncertaint after former national security advisor Michael Flynn was reportedly prepared to cooperate the special counsel probe into alleged links between the Trump campaign and Russia during last year’s election.
Flynn pleaded guilty Friday morning to lying to the Federal Bureau of Investigation about his communications with the Russian ambassador to the U.S. in December 2016.
The Trump administration has said its tax cuts will generate growth and spark inflation, which investors hope will prompt a faster pace of monetary tightening by the Federal Reserve.