Dollar Gains as US Senate Approves Tax Bill

On Monday, the dollar was broadly higher and reached a 2-1\2-week peak against the yen after the U.S. Senate approved a tax overhaul over the weekend.

Dollars went up as the United States Senate passes the tax bill.

The approval of the Senate on Saturday moves President Donald Trump and the Republicans a big step closer to their goal of cutting taxes in what would be the largest change to U.S. tax laws since the 1980s.

The dollar has drawn support on expectations that tax cuts for corporations and the wealthy people would stimulate the U.S. economy, and drive Treasury yields higher, as the government becomes more dependent on debt due to reduced tax income.

 This week, the talks will begin between the Senate and the House, which already has approved its own version of the legislation, to reconcile their respective bills.

“From a technical perspective the dollar is positioned to extend its gains. But fundamentally it will need progress between the Senate and the House on the tax agenda and also an upbeat reading from Friday's employment data,” the senior forex strategist, Junichi Ishikawa said.

“The dollar still has to contend with potential negative pressure from the ongoing Russia probe, especially if investigations affect President Donald Trump's inner circle.”

On Friday, the greenback took a knock after Michael Flynn, the former national security adviser, pleaded guilty to lying to the FBI about his contacts with Russia, and agreed to cooperate with prosecutors.

As of now, the dollar was on the front foot, up 0.4 percent at 112.735 yen after rising to 112.985, its highest since November 17.

The euro went down 0.25 percent to $1.1871, while the dollar index, which measures the dollar against a basket of six major currencies added 0.25 percent to 93.110.

The U.S. currency was supported as Treasury yields went up. The 10-year benchmark Treasury yield raised about 4 basis points to 2.404 percent in response to the U.S. Senate’s approval of the tax bills.

Treasury yields went up alongside U.S. equities futures, which pointed to a higher open for Wall Street shares later in the session. U.S. stocks have recently leaped to record highs, sustained by the prospect of the U.S. tax cut bill being passed.

“The dollar is only making measured gains and this reflects the still remaining caution in the currency market towards U.S. tax reforms,” Koji Fukaya, the president at FPG Securities in Tokyo stated.

“While not yet as optimistic as the equity market, the currency market is likely to further warm to the idea of the tax bill's eventual passage.”

Trade12 is a community of brokers and investors serving the quality service to all present and potential clients. Join our community. Trade12 awaits you!