CURRENCIES: Dollar Index Jumps To 1-month High Ahead Of GOP Tax Plan

09/27/17 06:55 AM EDT

By Sara Sjolin, MarketWatch

Hawkish Yellen comments also lifting greenback

The greenback continued to rise on Wednesday, with a key dollar index jumping to a more-than one-month high as investors looked ahead to President Donald Trump's announcement on tax reforms.

The ICE Dollar Index climbed 0.4% to 93.344, trading around the highest levels since Aug. 23, according to FactSet data. That means the index, which measures the buck against a basket of six other currencies, now has risen for three days straight.

The rally has largely been supported by hints from the Federal Reserve that interest rates will go up in December and several times in 2018. Those expectations were strengthened on Tuesday when Fed Chairwoman Janet Yellen reaffirmed expectations for a rate hike later in 2017 (http://www.marketwatch.com/story/yellen-says-fed-should-be-wary-of-raising-rates-too-gradually-2017-09-26), saying it would be "imprudent" to leave monetary policy on hold until inflation hits the central bank's target.

On Wednesday attention turned to Trump's expected outline on tax reforms, which is expected to include plans to significantly cut taxes for both corporations and individuals.

"Investors will want to hear a concrete list of actions rather than another 'wish list,'" said Konstantinos Anthis, researcher at ADS Securities, in a note.

"If President Trump confirms expectations today and delivers a comprehensive tax overhaul plan the U.S. currency will extend its gains," he added.

The dollar also got a lift from a weaker euro, that's been sliding all of this week following the German election over the weekend. While Chancellor Angela Merkel secured a fourth term in power, a significant drop in support for her party means coalition talks could be difficult and protracted, sparking uncertainty about the eurozone.

The shared currency dropped to $1.1752 on Wednesday, down from $1.1795 late Tuesday in New York.

"The German elections may have provided a reality check on how investors evaluate eurozone political risks. Adding fuel to the fire, may be noise around the Catalan referendum -- which might still go ahead this Sunday, despite Spain's constitutional court declaring the vote illegal," said Viraj Patel, FX strategist at ING, in a note.

"Negative political sentiment may keep the euro-dollar on the back foot, but material downside today is unlikely in the absence of a credible GOP tax plan," he added.

The pound also suffered against the dollar, buying $1.3425, down from $1.3460 on Tuesday.

Against its Japanese counterpart, the dollar fetched Yen112.86, up from Yen112.24 on Tuesday.

 

(END) Dow Jones Newswires

September 27, 2017 06:55 ET (10:55 GMT)

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