Dollar holds gains as attention turns back to tax cut hopes
The dollar held gains in Asia on Tuesday as markets shrugged off geopolitical concerns and focused on chances that President Donald Trump could recover from two weeks of political setbacks and set the stage to push tax cuts when Congress returns from its summer break.
USD/JPY changed hand sat 109.27, up 0.28%, while AUD/USD traded at 0.7940, up 0.03%. GBP/USD traded at 1.2886, down 0.12%. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.10% to 93.09.
Overnight, the dollar traded lower against a basket of global currencies on Monday amid an uptick in safe-haven demand, following renewed geopolitical tension in the Korean Peninsula, as U.S.-South Korea military exercises got underway.
The greenback lost ground against safe-haven currencies like the yen and the Swiss franc after the U.S. and South Korea began computer-simulated military exercises on Monday, risking a reaction from North Korean leader Kim Jong un, who may view such exercises as preparation for an invasion of the isolated nation.
Also adding to the downbeat sentiment on the greenback was Chicago manufacturing data that undershot economists’ forecasts.
The Chicago Fed Activity Index, measuring economic activity and inflation projections, missed expectations slightly, falling 0.01% to 0.15 from the previous month.
Sterling and the euro were the main beneficiaries of the greenback’s subdued start to the week, clawing back recent losses.
The slump in the dollar comes ahead of the key events due later this week, including speeches by central bankers Janet Yellen and Mario Draghi, expected to provide further direction for the beleaguered dollar.