NEW YORK (Reuters) - The dollar rose against most currencies on Tuesday, helped by upbeat U.S. housing data, but gains were limited by doubts about the overall impact of a major U.S. tax overhaul plan on the economy.
The Republican-controlled U.S. Congress will begin voting on Tuesday on the biggest changes to the U.S. tax system in more than 30 years, with little standing in the way of the party’s first major legislative bill under President Donald Trump.
The U.S. House of Representatives, which introduced initial tax legislation barely six weeks ago, was poised to act first with a Tuesday afternoon vote.
Stock markets around the world surged this week on U.S. tax cut hopes, but the greenback has remained muted. Traders believe most of the positive impact of the cuts to corporate taxes have already been priced in, while expectations the overhaul would trigger a wave of repatriated dollars were overplayed.
The tax plan, designed in part to give U.S. multinationals a reason to repatriate the roughly $2.6 trillion in profits held by their foreign subsidiaries, would slash tax rates on such previously accumulated earnings.
“We think FX markets are less fazed by the bill; whether it will induce a material shift in investment and the balance of payments remains unclear,” said Mazen Issa, senior FX strategist at TD Securities in New York.
The greenback earlier gained ground after data showed domestic home construction unexpectedly rose to a 13-month peak in November with the building of single-family homes hitting a 10-year high.
In mid-morning trading, the dollar rose 0.2 percent against the yen to 112.82 yen JPY=. It also moved higher against the Swiss franc CHF= and sterling GBP= as well as the Australian AUD=, Canadian CAD=, and New Zealand dollars NZD=.
Against the euro, however, the dollar was weaker. The euro was last at $1.1814 EUR=, up 0.3 percent.
Europe’s shared currency has gained more than 12 percent against the dollar so far this year and is on track to post its strongest yearly performance since 2004.
“A year ago there was a lot of excitement [regarding repatriation of dollars after the tax reform]. Now it’s a bit of a damp squid,” said Jane Foley, a senior FX strategist at Rabobank in London.
She said caution about the outlook for the U.S. economy was also holding the dollar back.
“It’s very difficult to call for a significant increase in value of (U.S.) yields when inflation is low. That is a constraint for the value of the dollar,” she said.
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Tommy Wilkes in London; Editing by Meredith Mazzilli