Dollar wavers amid doubts over Trump’s tax plans, euro hits 12-day high

Speculation that President Donald Trump’s tax overhaul plan would stall kept the dollar below a recent 10-week peak against major currencies on Wednesday, and the euro held near a 12-day high as political tensions over Catalonia receded slightly.

The euro was flat at $1.1808 after touching $1.1828, its highest since Sept. 29, thanks partly to upbeat euro zone economic indicators that have helped it rally from a seven-week low of $1.1669 on Friday.

The euro’s rally strengthened after Catalan leader Carles Puigdemont on Tuesday proclaimed the region’s independence from Spain but said the effects would be postponed to allow for talks, averting an immediate crisis.

“That Puidgemont has suggested making time for talks is supporting the euro. The main scenario is likely to involve the Spanish central government award some concessions to Catalonia to defuse the situation,” said Daisuke Karakama, chief market economist at Mizuho Bank.

Strong economic data out of Germany boosted confidence in the euro, as robust industrial output numbers posted on Monday were followed by figures on Tuesday showing exports surged in August.

“The Catalonia issue is likely to fade away as a market theme and speculators will find it harder to sell the euro in turn,” said Yukio Izhizuki, senior currency strategist at Daiwa Securities.

“The dollar is also looking heavy against the euro due to uncertainty over U.S. tax issues. Squabbles surrounding Trump’s efforts come as no surprise, but it is still not helping the dollar.”

President Trump’s public feud with Tennessee Senator Bob Corker, an influential fellow Republican, has raised concern that his push for a tax-code overhaul could be harmed.

The dollar was effectively unchanged at 112.470 yen after slipping to as low as 111.990 overnight.

Stronger than expected U.S. wages had helped the greenback rise to a three-month high of 113.440 yen on Friday, but the latest flare up in tensions with North Korea reduced the gains.

The dollar index against a basket of six major currencies was steady at 93.282 on Wednesday, having come back from a 10-week peak of 94.267 on Friday.

Investors were awaiting the release of minutes of the September Federal Reserve policy meeting later in the session. The Fed had signaled at the meeting that it may raise interest rates for a third time this year even with inflation staying below its 2 percent goal.

But with the Fed funds futures almost fully pricing in the likelihood of a rate hike in December and the recent spike in Treasury yields losing momentum, analysts said fresh factors could be needed for the dollar to renew its advance.

The Australian dollar was steady at $0.7781 after rising to $0.7810 earlier on an upbeat domestic consumer confidence reading.

The New Zealand dollar was 0.1 percent higher at $0.7077 after a brief foray to $0.7099. The kiwi remained in reach of a four-month low of $0.7052 struck on Monday after a final vote count in the country’s tight general election failed to identify a clear winner.

A wait and see mood prevailed as small party that holds the balance of power is holding a fourth day of talks aimed at forming a government in New Zealand, having delayed a decision on which party it would back.

The pound was nearly flat at $1.3202. Sterling had risen 0.5 percent overnight after stronger-than-expected British industry data cemented expectations that the Bank of England would raise rates for the first time in more than a decade next month. Source: Reuters