Article Highlights

  • Increasing skepticism about tax overhaul push hurts dollar
  • Euro hits six-day high vs dollar
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The U.S. dollar slipped to a six-day low against a basket of currencies on Thursday as investors fretted over a Republican tax plan that would delay corporate tax cuts.

Senate Republicans are unveiling a tax proposal that differs markedly on corporate, business and individual tax cuts from legislation unveiled by their counterparts in the House of Representatives, Republican aides said on Thursday.

The Senate proposal delays a corporate tax rate cut to 20 percent by a year, said aides from the tax-writing Senate Finance Committee.

“Maybe the detail that is most disappointing to the market is the delay in corporate tax cuts,” said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.

“If that is being considered, then there must be other problems and the likelihood of this passing is reduced,” he said. “That’s what is primarily driving price action.”

The dollar index, which tracks the greenback against six major currencies, was down 0.36 percent to 94.521.

“The initial reaction is disappointment over the Senate plan,” said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investment Management in Boston.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the dollar, analysts said.

Against the yen, the dollar slipped to its lowest this month and was down 0.43 percent to 113.37 yen.

“The dollar had just gotten bid up over the last two weeks as people backed out of short dollar positions,” said BMO’s Anderson. “Now they are just drifting back into them.”

Net short dollar positions have dwindled to their smallest in four months, with outstanding dollar shorts at $3 billion compared with $18 billion at end-September, according to the latest CFTC data.

Euro zone government bond yields jumped on Thursday, kicking recent sharp falls into reverse, and the euro climbed to a six-day high. The common currency was up 0.41 percent against the greenback.

Britain’s Sterling was up 0.26 percent against the greenback after erasing earlier losses. British Prime Minister Theresa May will restate her desire for a two-year Brexit implementation period when she meets European business organizations on Monday, her office said in a statement.

The Swiss Franc hit a two-week high against the dollar after Swiss National Bank Chairman Thomas Jordan said the franc was currently “highly valued” but avoided reiterating his oft-repeated – until summer – statement that the franc was “significantly over-valued.”