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US dollar rises on hopes for Trump tax reform

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The US dollar hovered near its highest level against a basket of major rivals in 11 days on Friday after comments from US President Donald Trump did little to shake optimism that his administration would reform tax policy soon.

[NEW YORK] The US dollar hovered near its highest level against a basket of major rivals in 11 days on Friday after comments from US President Donald Trump did little to shake optimism that his administration would reform tax policy soon.

At a joint news conference with Japanese Prime Minister Shinzo Abe, Mr Trump avoided repeating harsh campaign rhetoric that accused Japan of taking advantage of US security aid and stealing American jobs.

Mr Trump did not reiterate his recent accusation that Japan was one of several countries devaluing their currencies to the disadvantage of the United States, but said in reference to currency devaluations that countries would be at a level playing field soon.

Despite briefly turning negative during the news conference, the US dollar index was last up about 0.2 per cent at 100.800, roughly unchanged from where it was before the conference and near an 11-day high of 101.010 struck in morning US trading. The index measures the greenback against a basket of six major currencies.

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Analysts said Mr Trump's promise on Thursday of a "phenomenal" tax reform plan over the next two or three weeks continued to support the US dollar against most of its major rivals.

"The underlying bigger story in the last 24 hours is that Trump has put the reflation trade back on the front foot by talking about a tremendous tax program," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.

The US dollar briefly fell to a session low of 112.87 yen during the Trump-Abe news conference. The US dollar index was still set to post its best weekly percentage gain since mid-December, of 0.9 per cent.

Analysts said an announcement that Federal Reserve Governor Daniel Tarullo would resign from the US central bank opened the door for Mr Trump to choose a more hawkish replacement, and may have been positive for the US dollar on the margin.

"The prospect of one less dove on the committee could strengthen the argument for the Fed to raise rates multiple times this year," said Joe Manimbo, senior market analyst with Western Union Business Solutions in Washington.

The euro was last down 0.2 per cent against the US dollar at US$1.0631, near a more than three-week low of US$1.0608 touched before the Trump-Abe news conference.

The USdollar was up about 0.2 per cent against the yen at 113.40 yen, not far from a nine-day high of 113.85 yen touched earlier.

REUTERS

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