US dollar steadies, earlier rise stalls as market endures US tax bill wait

[TOKYO] The US dollar steadied against the yen on Friday, losing steam after rising to a 10-day high, as the market endured the wait for a vote on a US tax reform bill.

The greenback stretched overnight gains and initially climbed to 112.690 yen, its highest since Nov 21, as Wall Street rallied and Treasury yields spiked after US tax reform plans were seen progressing towards legislative approval following an endorsement by Senator John McCain.

But the US dollar was last at 112.510 yen, unchanged on the day, after it was decided that the US Senate will not vote on the tax bill late on Thursday night US time but would continue the debate on Friday.

"That fact that the vote did not take place on Thursday evening shows that there are still some kinks to be ironed out, but it is not like the deliberations have fallen through," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

"The dollar stalled along with the slip in equities, but equities were due for a minor correction after yesterday's surge."

S&P mini futures were last down 0.3 per cent after Wall Street shares soared to record highs on Thursday.

The US dollar index against a basket of six major currencies was 0.1 per cent lower at 92.956 but poised to eke out a 0.2 per cent gain for the week, during which it managed to pull away from a two-month low of 92.496.

The euro was little changed at US$1.1908 after gaining about 0.5 per cent the previous day.

The common currency, which reached a two-month top of US$1.1961 on Monday following upbeat German data and pressured the dollar, was still on track for a 0.3 per cent weekly loss after a volatile week.

The pound was a shade higher at US$1.3534 after surging 0.9 per cent overnight when it set a two-month high of US$1.3549.

"Hopes in the euro zone appear strong that ongoing talks in Germany would lead to a coalition government, while in Britain there is growing optimism over Brexit negotiations progressing," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"Short-term investor pessimism towards the euro zone and Britain is receding, supporting the euro and pound against the dollar. But dollar/yen maintains a high correlation with US yields, which explains the latest rise by the pair," Mr Yamamoto said regarding the dollar's rise early on Friday.

German Chancellor Angela Merkel's conservatives held talks late on Thursday with centre-left Social Democrats (SPD) to facilitate the formation of a stable government in a bid to end the country's political impasse, but the outcome was not known by early Friday.

The New Zealand dollar stood little changed at US$0.6828 after news the country's terms of trade hit a record high in the third quarter.

The kiwi had sunk 0.7 per cent the previous day, hurt by a weak business sentiment reading and lacklustre housing data.

The Australian dollar was 0.05 per cent lower at US$0.7561, headed for its sixth straight session of losses. A move below US$0.7532 would take the currency to its lowest since June.

The Aussie has struggled against the buoyant US dollar, which has benefited this week from a significant rise in Treasury yields and upbeat economic indicators.

REUTERS