The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump's tax reform plans.
The Washington Post, citing unidentified sources, reported on Tuesday that Senate Republican leaders are considering a one-year delay in the implementation of a major corporate tax cut to comply with Senate rules.
Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency, analysts said.
Senate Republicans are expected to unveil their own tax bill at the end of the week, and early indications suggest it could differ significantly from legislation proposed in the House of Representatives.
The dollar was down 0.33 percent to 113.62 yen, after having fallen as low as 113.4 yen, earlier in the session.
The dollar index .DXY, which tracks the greenback against six major currencies, was down 0.03 percent at 94.88.
“I think it is to do with uncertainty surrounding the path towards tax reform,” said Vassili Serebriakov, FX Strategist at Credit Agricole in New York.
“In terms of data, it is very quiet this week. The December (interest rate) hike is fully priced in but there is a lot of uncertainty about next year, especially with the composition of the FOMC,” he said, referring to U.S. central bank’s policy-setting Federal Open Market Committee.
On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.
That raised another question over leadership at the central bank, less than a week after Trump chose a new Fed chief.
“It is difficult for markets to trade the Fed at the moment, so that kind of leaves most of the focus on tax reform,” Serebriakov said.
Sterling slipped against the greenback with a string of scandals in Britain’s ruling Conservative party and evidence of growing doubts over Prime Minister Theresa May’s ability to deliver a good Brexit deal putting pressure on the pound.
“Sellers have exploited the unsettling combination of political uncertainty in the UK and lingering concerns over the Brexit negotiations to attack the British pound,” said Lukman Otunuga, research analyst at FXTM in London.
The Canadian dollar strengthened against its U.S. counterpart, adding to its gains after comments by Bank of Canada Governor Stephen Poloz the day before that were less dovish than investors had expected.