TOKYO
(Reuters) - The dollar nursed losses on Wednesday after skidding to a 10-month
low against a currency basket as Republican legislators' failure to pass a
stalled
healthcare bill raised fears for the rest of President Donald's Trump
reform agenda.
Republican
efforts to overhaul or repeal Obamacare collapsed in the U.S. Senate on
Tuesday, rattling financial markets and casting doubt on the chances of getting
Trump's economic plans, such as tax reform and stimulus, through a divided
Congress.
The dollar
index, which tracks the greenback against a basket of six major rivals, edged
up 0.2 percent to 94.780 after falling as low as 94.476 on Tuesday, its lowest
level since September 2016.
The euro
inched 0.2 percent lower to $1.1534, after rising as high as $1.1583 on
Tuesday, its highest since May 2016.
The European
Central Bank will hold a policy meeting on Thursday, with participants seen
likely to adjust their language as they edge the ECB towards normalising
policy.
Such
adjustments may include dropping a reference to the bank's readiness to
increase the size or duration of its asset-purchase programme before announcing
in the autumn how and when it will start winding down its bond-buying.
The ECB,
keen to retain flexibility in case the outlook sours, is set to keep its asset
purchases open-ended rather than setting a potentially distant date on which
bond-buying will stop, three sources familiar with the discussion said.
ECB
President Mario Draghi roiled markets last month when he opened the door to
potential adjustments to the quantitative easing programme.
"For
the ECB, the market has shifted its expectations somewhat in recent weeks,
especially following Draghi's comments which were taken to be more
hawkish," said Mitul Kotecha, head of Asia macro strategy for Barclays in
Singapore.
"To
this extent, there's a lot already priced in, in terms of both the euro and
expectations of ECB policy," he said. "The attention is on whether
that is sustained in terms of what Draghi was saying, or whether we'll see some
reassessment."
Expectations
that the Federal Reserve will be more cautious about raising interest rates
also weighed on the greenback.
Economic
data on Tuesday showed U.S. import prices falling for a second straight month
in June as the cost of petroleum products declined further, suggesting
inflation pressures could remain weak for a while.
Fed Chair
Janet Yellen signalled caution in congressional testimony last week, with
disappointing U.S. inflation and retail sales data on Friday adding to evidence
that the central bank has reason to take its time in tightening.
"The
failure of the healthcare bill added the newest pressure to the dollar, but it
was already under pressure after Yellen's comments last week," said Mitsuo
Imaizumi, Tokyo-based chief foreign exchange strategist for Daiwa Securities.
The Fed
chief referred to "uncertainty," he said, a word that "makes
markets nervous," and prompted them to pare their expectations of another
interest rate hike this year, he said.
The dollar
was flat against its Japanese counterpart at 112.065 yen, well below its nearly
four-month high of 114.495 touched last week. It fell as low as 111.685 on
Tuesday, its lowest since June 27.
The Bank of
Japan will also conclude a policy meeting on Thursday. Policymakers are
expected to raise their economic growth forecasts but cut their rosy inflation
outlook, sources say, reinforcing expectations it will lag well behind major
global central banks in dialling back its massive stimulus programme.
A majority
of economists polled by Reuters expect the BOJ to delay again its projected
timing for achieving the 2 percent inflation target.
The
Australian dollar was up 0.2 percent to $0.7926 after surging to two-year highs
on Tuesday as minutes of the last meeting of the country's central bank showed
policymakers turned more upbeat on the economic outlook.
The dollar
edged down 0.2 percent against the Mexican peso to 17.446 after credit ratings
agency Standard & Poor's on Tuesday revised Mexico's sovereign credit
outlook up to "stable" from "negative," and commended the
government's efforts to rein in a surge in debt.
Reuters
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