Dollar extends gains on Trump tax hopes, Nikkei lifted by Abe win

HONG KONG: The dollar extended last week's gains in Asian trade Monday on hopes for Donald Trump's tax-cut plans, while Tokyo chalked up a record winning streak on a weak yen and following a big election win for Prime Minister Shinzo Abe.

US markets powered to new all-time highs on Friday after senators voted for a federal budget plan that permits them to introduce the tax cuts with a simple majority vote instead of a 60-40 majority.

While there is a long way to go for the proposals to actually be implemented, the news provided a boost to already optimistic investors.

Expectations the tycoon's tax cuts and big spending plans would boost the economy were one of the drivers of a months-long global markets rally that kicked off after his November election. However, a series of White House crises and legislative setbacks pared those gains.

Forex traders, betting the cut will fan inflation and in turn lead to further Federal Reserve interest rate hikes, briefly pushed the dollar above 114 yen on Monday for the first time since July.

"The budget clears a hurdle to the much anticipated Trump tax cuts, which in turn are expected to both improve the US economic and earnings outlook while at the same time strengthening hawks at the Fed's hand to pursue at least four rate hikes in the next 14 months," said Greg McKenna, chief market strategist at AxiTrader.

The greenback was also well up against most other currencies, with the euro struggling with the fallout from Spain's Catalonia crisis after the national government imposed direct rule on the region following this month's controversial independence vote.

Adding to the yen's weakness was Abe's resounding victory in the weekend's general election, which gives him a mandate to press on with his easy money, big-spending "Abenomics" programme to kickstart the Japanese economy.

Tokyo's traders welcomed the latest developments, sending the Nikkei surging 0.9 percent by the break, marking a record 15 straight gains

"It's a relief for foreign investors who had bought Japanese stocks aggressively before the election on a bet that Abenomics will continue," said Masayuki Kubota, chief strategist at Rakuten Securities, referring to Abe's flagship growth policy.

However, other Asian markets were mixed, with Hong Kong down 0.7 percent and Seoul 0.1 percent off while Shanghai was marginally lower.

Sydney edged up 0.1 percent and Singapore gained 0.3 percent. Taipei, Manila and Jakarta were also up.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 0.9 percent at 21,658.25 (break)

Hong Kong - Hang Seng: DOWN 0.7 percent at 28,281.25

Shanghai - Composite: FLAT at 3,377.63

Dollar/yen: UP at 113.93 yen from 113.51 yen at 2100 GMT on Friday

Euro/dollar: DOWN at $1.1760 from $1.1781

Pound/dollar: UP at $1.3196 from $1.3189

Oil - West Texas Intermediate: UP 17 cents at $52.02 per barrel

Oil - Brent North Sea: UP seven cents at $57.82 per barrel

New York - DOW: UP 0.7 percent at 23,328.63 (close)

London - FTSE 100: FLAT at 7,523.23 (close)