LONDON (Reuters) – The dollar only held its gains against the Japanese yen on Thursday after U.S. President Donald Trump’s tax plan offered no surprises, slowing the greenback’s rally.
The market also awaited the European Central Bank’s monetary policy decision.
The Canadian dollar and Mexican peso, which had slumped earlier on reports the United States is considering withdrawing from the North American Free Trade Agreement (NAFTA), bounced sharply after Trump said he would not scrap the pact but renegotiate instead.
The U.S. dollar had surged to a four-week high of 111.780 yen on Wednesday before Trump’s tax reform plans were unveiled. But it lost traction as the proposals failed to excite investors. The dollar was last up 0.2 percent at 111.20 yen <jpy=>.
The dollar index against a basket of major currencies slipped 0.2 percent to 98.841 (DXY) after rising as far as 99.332 the previous day.
Trump’s plan would cut the income tax rate paid by public corporations to 15 percent from 35 percent and reduce the top tax rate assessed on pass-through businesses, including small partnerships and sole proprietorships, to 15 percent from 39.6 percent.
“It (the plan) was kind of as we expected really. The dollar generally has come off on the view that the announcement of the so-called plan reads more like a wish list than a firm plan,” said Adam Cole, currency strategist with RBC Capital Markets in London.
The euro was up 0.1 percent at $1.0913 <eur=>. It has had a buoyant week, climbing to a 5-1/2 month high of $1.0951 on Wednesday, as the first round of the French presidential elections held over the weekend reduced perceived risk toward the common currency.
The European Central Bank is due to announce its policy decision later on Thursday. It is not expected to move, waiting until its June meeting to signal any plans to pull back from its ultra-loose monetary policy.
The Swedish crown fell more than half a percent to 9.060 per euro (EURSEK=) after the Riskbank kept its benchmark interest rate at -0,5 percent, as expected, and said it would extend its bond-buying program by 15 billion Swedish crowns.
The Canadian dollar bounced 0.6 percent to C$1.3542 <cad=d4> per dollar, while Mexico’s peso <mxn=d2> strengthened 1.2 percent to 18.95 pesos per dollar as Trump’s latest stance on NAFTA eased concerns toward U.S. trade protectionism for now.
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