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Dollar limps away from multi-month lows, still seen vulnerable

3/28/2017, 9:38:34 AMMarket Analysis
Dollar limps away from multi-month lows, still seen vulnerable

The dollar limped away from multi-month lows against its major peers early on Tuesday as the previous day's rout petered out, but the U.S. currency remained on shaky ground with much of the lift from the "Trump trade" now gone.

The greenback had taken a beating as market participants saw the prospects for a U.S. fiscal spending boost from President Donald Trump significantly diminished by his failure to pass a key healthcare reform bill.

The dollar remains on biased towards the downside as expectations that the Trump administration will be able to deliver on tax reform and infrastructure spending recede, said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"But a one-way drop by the dollar is also unlikely as the Republicans cannot face midterm elections in November of next year without enacting a single fiscal stimulus step," he said.

The dollar index against a basket of major currencies as up 0.1 percent at 99.249 (DXY) after dropping to 98.858 overnight, its lowest since Nov. 11.

The index had risen to a 14-year high near 104.00 in early January when expectations for inflation-boosting stimulus under the Trump presidency were at their peak.

The dollar rose 0.1 percent to 110.800 yen following its slide to a four-month low of 110.110 overnight.

The euro was a shade lower at $1.0861 , nudged away from a 4-1/2-month peak of $1.0906 scaled the previous day.

The common currency was boosted when German Chancellor Angela Merkel's conservatives won a regional election in the western state of Saarland on Sunday, dealing a setback to their Social Democrat rivals and boosting her prospects of winning a fourth term in September's national election.

The pound was steady at $1.2559 after surging almost one percent to an eight-week high of $1.2615 overnight against the flagging dollar.

The Australian and New Zealand dollars gained 0.1 percent to $0.7627 and $0.7047 , respectively.