The dollar clung to gains against the yen on Thursday after US President Donald Trump’s tax plan offered no fresh surprises, halting the greenback’s rally, while the market awaited the European Central Bank’s upcoming monetary policy decision.
The Canadian dollar and Mexican peso also lost steam on reports the United States is considering withdrawing from the North American Free Trade Agreement (NAFTA).The dollar index against a basket of major currencies was little changed at 98.931 after rising to 99.332 overnight. The dollar was up 0.15 percent at 111.220 yen.
The US currency had surged to a four-week high of 111.780 yen overnight before the unveiling of Trump’s tax reform plan, but it lost traction as it failed to excite investors.Trump’s plan would cut the income tax rate paid by public corporations to 15 percent from 35 percent and reduce the top tax rate assessed on pass-through businesses, including small partnerships and sole proprietorships, to 15 percent from 39.6 percent.
“The Trump tax plan did not go beyond what the media had been reporting all week. And while the plan appears ambitious, its foundations are shaky from a revenue perspective,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo. “Participants have become wary of pushing the dollar further under such conditions.”
The euro was up 0.1 percent at $1.0911.
The euro has had a buoyant week, climbing to a 5-1/2 month high of $1.0951 on Wednesday, as the first round of the French presidential elections held over the weekend reduced perceived risk towards the common currency. Gains for the euro this week have also been spurred by expectations of a change in the direction of ECB policy in coming months, that it would soon scale back monetary stimulus.
The central bank is due to announce its policy decision later on Thursday and the focus is on whether the recent French election results, which favour a pro-euro centrist, had any impact in the ECB’s stance. The Australian dollar was a shade higher at $0.7478 , steadying after retreating to a three-month low of $0.7455 the previous day on lacklustre local inflation data.
The Canadian dollar extended losses on the possibility of a US withdrawal from the NAFTA trade deal. The loonie weakened to a 14-month low of C$1.3636 per dollar. The Mexican currency sank to a more than one-month low of 19.29 pesos per dollar overnight.
In a move that could unravel one of the world’s biggest trading blocs, Trump is considering issuing an executive order to pull the United States from NAFTA, a senior administration official said on Wednesday.