Dollar slips vs yen on US tax reform doubts

LONDON: The dollar slipped against the yen on Thursday, pressured by talk of possible delays to US President Donald Trump's tax reform plans and lower Treasury yields.

The "Trumpflation trade" -- bets that Trump's policies would boost growth and inflation, meaning a faster pace of US interest rate hikes -- had driven the dollar to 14-year highs in the aftermath of his election, and 10-year US Treasury yields to their highest since 2014 at more than 2.6 percent.

But they and the dollar have since fallen back.

It was down a third of a percent on Thursday at 113.46 yen , just above an eight-day low hit on Wednesday and remaining well below an eight-month high of 114.735 yen set on Monday.

The US 10-year Treasury yield - which is closely correlated with the dollar/yen rate - stood at 2.329 percent, having retreated from a seven-month high of 2.477 percent set in late October.

"Treasury yields have backed off and I don't think anyone is terribly optimistic about what we're going to get from the Republican tax plan," said Societe Generale macro strategist Kit Juckes.

The euro held steady at $1.1592, staying above a trough of $1.1553 set on Tuesday, its lowest since July 20.

"There's a bit of a sense that the euro/dollar correction aside, there's not much to push the dollar higher," Juckes added.

A US Senate tax-cut bill, differing from one in the House of Representatives, was expected to be unveiled on Thursday, complicating a Republican tax overhaul push and increasing scepticism on Wall Street about the effort.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the dollar, analysts said.

"(It) could go through a weakening phase on the back of uncertainty around that tax reform," said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne.

The dollar was flat at 94.903 versus a basket of six major currencies, below a three-month high of 95.150 set in late October.

The New Zealand dollar touched a two-week high after comments from the country's central bank on the inflation outlook were taken as hawkish, as it kept interest rates unchanged as expected.

The currency rose as high as $0.6977, its strongest level since Oct. 24, before dipping to trade at $0.6969, flat on the day.