Tuesday, 12 December, 2017

Dollar snaps three-day losing streak on U.S. tax plan bets

U.S. Dollar and Japan Yen notes 2017. REUTERS Thomas White Illustration File
Nellie Chapman | 06 December, 2017, 16:58

The U.S. dollar was initially boosted after the U.S. Senate passed over the weekend amid expectations that tax cuts for corporations will stimulate the U.S. economy.

MSCI´s broadest index of Asia-Pacific shares outside Japan hovered near more than one-month lows on fears US policy tightening could suck liquidity from emerging markets and derail global growth.

The euro slipped 0.15 percent, while the British pound was steady amid media reports that an agreement was near on the terms of the Brexit divorce.

Meanwhile, the Republican-controlled U.S. House of Representatives voted on Monday to go to conference on tax legislation with the Senate, moving Congress another step closer to a final bill.

USA stock markets have already rallied for months on hope that Washington would provide significant tax cuts for corporations. Asian shares started the week with a whimper.

Spot gold had inched 0.1 percent lower to $1,264.260 an ounce by 1420 GMT after it hit its weakest since October 6 in the previous session. Japan's Nikkei eased 0.2%.

The dollar was up 0.6 percent at 112.935 yen after rising to 112.985, its highest since November 17.

The dollar rebounded to a two-week high on Monday after taking a brief hit on Friday on news that Michael Flynn, former national security adviser to Trump, pleaded guilty to lying to the U.S. Federal Bureau of Investigation about his contacts with Russian Federation.

Yields on two-year notes rose to 1.806%, while those on the 10-year bond climbed to 2.4026%.

Spot gold was down 0.6% at US$1,272.91 an ounce, as of 0735 GMT, after touching a high of US$1289.50 on Friday.

Despite broad-based gains in the greenback, the Australian dollar found support near 76 USA cents as iron ore futures rallied for a fourth straight day.

Meanwhile, investors also kept a keen eye on developments surrounding North Korea, with South Korea and the USA launching their largest-ever joint aerial drills on Monday, days after the North tested its most advanced intercontinental ballistic missile.

Iron ore is Australia's top export earner and higher prices boosts national income and corporate profits.

The cryptocurrency was last trading near $11,230 on the Luxembourg-based Bitstamp exchange.

"A shutdown in the government should be positive for gold but that could be temporary because no one really expects the U.S.to default", said Capital Economics commodities economist, Simona Gambarini. Brent blend crude slipped 35c to $63.38, drifting away from a almost two-and-a-half-year peak of $64.65 touched last month.

USA gold futures were down 0.5% at US$1,275.80 an ounce.