UPDATE: Dollar on track to break weekly win streak as tax-reform concerns persist

11/10/17 03:05 PM EST

By Carla Mozee, MarketWatch , Anneken Tappe

Consumer-sentiment disappointment weighs on dollar index

The U.S. dollar was weaker against key rivals on Friday, on track to break three-week winning streak due to concerns that Washington will have a difficult time hammering out a tax bill that can be made into law.

Where are currencies trading?

The ICE U.S. Dollar Index , which measures the buck against six rivals, slipped 0.1% to 94.386. That put it on course to fall 0.6% for the week, and FactSet data showed that would be the first weekly decline in four. The broader WSJ U.S. Dollar Index stood at 87.63, down 0.4% on the week.

The euro bought $1.1664, up from $1.1640 late Thursday in New York. The shared currency was looking at a weekly rise of 0.5%.

Read:Euro bulls try for comeback on U.S. tax-cut worries (http://www.marketwatch.com/story/euro-bulls-try-for-comeback-on-us-tax-cut-worries-2017-11-09)

The British pound fetched $1.3202, up from $1.3137, after data showed Britain's industrial output (http://www.marketwatch.com/story/uk-construction-output-has-worst-fall-in-5-years-2017-11-10) expanded by a faster-than-expected rate of 2.5% in September on a year-over-year basis. This marked the first break above $1.32 for the pound in six days. Meanwhile, the EU's chief Brexit negotiator reportedly said the U.K. needs to settle on its so-called divorce bill in the next two weeks in order for the U.K. and the EU to begin discussing trade terms. This week, sterling gained 1% against the dollar.

The greenback receded against Japan's currency as it traded at Yen113.21 versus Yen113.44, down 0.7% on the week.

Against Switzerland's unit, , the buck bought 0.9958 francs, little changed from 0.9937 francs. On the week, the greenback lost 0.4% aginst the Swiss franc.

Against the Canadian dollar , the greenback hovered around a more than two-week low at C$1.2675, versus C$1.2681 late Thursday. Week-on-week, the pair slipped 0.7%.

In emerging markets, the South African rand is one of the worst performers against the buck, adding on from losses on Thursday following reports that President Jacob Zuma would announce a plan for free tertiary education. The dollar last bought 14.3735 rand, up from 14.2681 rand late Thursday, and 1.1% higher than last week Friday. The dollar-rand pair is on pace for its fourth weekly gain in a row.

What is driving the market?

Dollar traders continued to be shaken by uncertainty over progress of the Republican-led tax reform plan lingers. In a blow to dollar bulls on Thursday, Senate Republicans proposed to delay a cut in the corporate tax rate (http://www.marketwatch.com/story/senate-tax-bill-delays-corporate-cut-doesnt-repeal-estate-tax-2017-11-09) to 20% from 35% by a year until 2019, diverging from the bill put forth by House Republicans.

The two versions of the tax overhaul will be negotiated before a final vote, but faith that significant progress will be made before year-end seems to be waning.

There have been widespread expectations that tax cuts as well as a boost in fiscal spending by the Trump administration would juice up inflation and lead the Federal Reserve to continue rating interest rates that, in turn, would push up the greenback's value.

Read:How the Senate's bill may differ from House's (http://www.marketwatch.com/story/trump-claims-hed-be-big-loser-from-tax-plan-how-the-senates-bill-may-differ-from-houses-2017-11-08)

And see:1 in 5 would see tax hike in a decade under Republican bill, analysis finds (http://www.marketwatch.com/story/one-in-five-would-see-tax-hike-in-a-decade-under-republican-bill-congressional-analysis-finds-2017-11-07)

The dollar fell further Friday morning after a reading of consumer-sentiment index (http://www.marketwatch.com/story/consumer-sentiment-falls-in-november-amid-slight-stirrings-of-inflation-concerns-2017-11-10)slumped to 97.8 in November (http://www.marketwatch.com/story/consumer-sentiment-falls-in-november-amid-slight-stirrings-of-inflation-concerns-2017-11-10), coming in below the MarketWatch consensus estimate of 100.7.

What are strategists saying?

"In our view, the speed with which this process has moved forth in recent weeks demonstrates that Republicans are indeed committed to achieving tax reform sooner rather than later, and perhaps as early as this year," said Marios Hadjikyriacos, research analyst at IronFX, in a note.

"Any further steps in the next weeks that increase the likelihood of finalizing tax reform, such as material progress in the reconciliation process between the House and Senate, could help the greenback to regain more ground. On the other hand, headlines pointing to unwanted delays are likely to work against the currency," said Hadjikyriacos.

Even though the dollar has been a strong performer since the summer, there are a number of reasons to question whether it will be able to maintain this strength into year-end, according to research by Bank of America. "The market expects a December Fed hike, but is still far from the dot plot of 2018 and 2019," wrote strategists including Athanasios Vamvakidis. "The strong consensus remains that the tax reform will be difficult to approve and in any case will be light on its macro and market impact."

-Anneken Tappe; 415-439-6400; AskNewswires@dowjones.com

 

(END) Dow Jones Newswires

11-10-17 1505ET

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