Dollar Declines on Tax Uncertainty; Kiwi Gains: Inside G-10

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The dollar declined slightly amid uncertainty about U.S. tax reform, with the Senate planning to unveil its bill Thursday morning. The kiwi was the biggest gainer against the greenback after its central bank moved up its expected date for achieving its inflation goal.

  • The Bloomberg Dollar Spot Index continued its saw-tooth trading pattern of the week to fall 0.1 percent on a day devoid of U.S. economic data. U.S. Treasury yields climbed with U.S. stocks even as crude oil failed to hold an advance to a year-to-date high. The kiwi rose to a two-week high after the Reserve Bank of New Zealand left rates unchanged as expected, while saying it expects inflation to reach 2 percent by 2Q 2018 from 1Q 2019 previously
  • The dollar dropped versus almost all of its G-10 peers, seeing the biggest losses against the New Zealand, Canadian and Australian dollars. The greenback gained 0.4 percent versus the British pound, offsetting some of its overall decline. The pound fell amid fresh political concerns surrounding Theresa May’s cabinet, though was unfazed by an announcement late in the day that international development secretary Priti Patel had resigned 
  • USD/JPY is trading around 113.85; the pair rebounded after setting a fresh low at 113.40 earlier in the session. The afternoon move tracked the decline in Treasuries, as yields lifted to the high of the day. Traders attributed the eight-day low to an unwind of stale positions, especially in USD/JPY, where dollar advances above 114.00 have been thwarted by Japanese exporters and other USD sellers
    • Nonetheless, USD is seen as an attractive buy on dips as domestic investors and life insurers accumulate the currency for offshore investments, said Neil Jones, head of institutional FX sales at Mizuho
    • USD/JPY may find tech support at 112.96 from the Oct. 31 low, while EUR/JPY may find support near 131.00 from the cloud base on Ichimoku charts
  • GBP/USD was trading just north of 1.3100 after falling to a low at 1.3087. Pair may find technical support from the little-watched 133-DMA that has underpinned recent declines in the pair. Stop-loss sell orders are in place below 1.3040, a trader in London said
  • EUR/USD was trading around 1.1598, returning to midrange after setting a new low at 1.1579 vs 1.1611 session high seen overnight. Offers to sell EUR are said to be layered above 1.1630 as traders look to sell rallies in the pair amid divergent Fed/ECB monetary policies. At the same time, EUR declines toward 1.1550 and 1.1500 are expected to be underpinned by option-related demand and lack of strong selling conviction, until current dynamics shift more strongly in favor of the USD
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