The dollar fell from a 3-1/2-month high against the yen, pulling back ahead of the unveiling of a U.S. tax bill after a one-day delay.
It reached its highest levels since July 11 as it had gained about 0.5 percent overnight and edged to 114.450 on Friday, supported by upbeat U.S. data and heightened prospects for a December interest rate hike by the Federal Reserve.
The increase of dollar was curtailed as other factors that the U.S. fiscal and monetary policy entails came into focus, slipping 0.15 percent to 114.030 yen.
“The dollar was buoyed by the Fed’s statement but the impact was limited as the decision and its statements produced little surprises,” stated senior strategist Shin Kadota.
“The likelihood of (Fed Governor Jerome) Powell being nominated as the next Fed chair is capping the dollar. The delay in the tax bill announcement is also a potential sign of internal squabbles,” Shin added.
Interest rates were left unchanged as expected, but further motivated expectations for year-end rate hike by emphasizing “solid” economic growth and a strengthening labor market. In the monetary policy, the robust U.S. ADP private employment report on Thursday was the most recent in a list of strong indicators that have supported the quest to normalize it by the Fed.
Since September, the dollar has drawn support on tax hopes and possibly some of the “tax reform trades”, which were the reason that the currency was lifted and could be unwound if the bill shows discord among lawmakers.
The announcement of who U.S. President Donald Trump plans to nominate as the next chair of the Federal Reserve is expected on Thursday, however, it seems that there is a discussion that he will nominate current Fed Governor Jerome Powell, seen as a less hawkish compared to other candidates, according to a source on Wednesday.
Pound Rate Decision Preparation
For the first time since July 2007, the Bank of England is widely expected to raise interest rates and investors will be focused on the degree of cooperation among policy makers as they avoid the likelihood of future increases.
The euro was 0.1 percent higher, standing at $1.1631, but against it, the pound was at 87.75 pence after an overnight advance to 87.33 pence, its strongest level since June.
Against a basket of six major currencies, the dollar index decreased 0.15 percent to 94.685 after a gain from the previous day’s 0.3 percent gain.
There was a jump with the sterling which was 0.1 percent $1.3265 ahead of a policy decision by the Bank of England.
The kiwi extended the previous day’s rally, when it rose by 0.3 percent at $0.6903 after data showed the nation’s projections of the jobless rate falling to a nine-year low. The New Zealand dollar had fallen to $0.6818 on Friday under pressure on fears of the New Zealand’s new Labor-led coalition government’s left leaning policies.
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