* Dollar hit as Trump suffers a big political setback
* Dollar index slides to near 2-mth low
* Dollar/yen hits 4-mth low, euro strongest since early Dec (Updates prices, adds quotes)
By Shinichi Saoshiro and Wayne Cole
TOKYO/SYDNEY, March 27 (Reuters) - The dollar slid to a near two-month low against a basket of currencies on Monday as concerns mounted about the chances of U.S. fiscal stimulus after President Donald Trump’s failure to push through a healthcare reform bill.
Trump’s inability to deliver on a major election campaign promise marked a big setback for a Republican president whose own party controls Congress, and raised doubts whether he will be able to push through tax reforms and mega-spending packages.
“Concerns towards the Trump administration have been reignited after his healthcare legislation setback. This is resulting in a bout of risk aversion weighing on the dollar,” said Shin Kadota, senior strategist at Barclays in Tokyo.
“There isn’t much going for the dollar right now and the market will be bracing for its further decline.”
Dragged down by declining U.S. yields, the dollar index against a basket of major currencies was down 0.4 percent at 99.258, its lowest since Feb. 2.
The index had risen to a 14-year high near 104.00 early in January when expectations for significant stimulus under the Trump presidency were at their peak.
U.S. equity index futures fell to a six-week low, in a sign of stress for Wall Street stocks which had ascended record peaks at the start of the month.
“Speculators are likely to close out their yen-selling positions and buy back the currency if U.S. stocks and yields continue adjusting lower and hurt risk sentiment,” said Koji Fukaya, president at FPG Securities in Tokyo.
Against the safe-haven yen, the dollar fell more than one percent to 110.260, its weakest since Nov. 22. It last traded at 110.335 yen.
Earlier in the session, the euro touched $1.0850, its highest since Dec. 8, and it was hovering near that level by the afternoon in Asia.
Some analysts were less pessimistic about Trump’s chances of success pursuing his economic agenda.
“There is a widespread perception that failure to pass the healthcare bill somehow derails the rest of the Trump agenda,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets.
“We think linking this particularly difficult legislative undertaking with the rest of the Trump is flawed,” he argued. “It actually presents a scenario where tax reform can potentially be accelerated.”
Others, however, including much of the mainstream press wondered how Trump would get any major changes through such a fractious Congress.
“It clearly highlights that divides remain, and it means that the policy paralysis that was often evident over recent years could linger,” wrote analysts at ANZ in a note.
“With fiscal policy uncertainty rising again, the risk is that business and consumer sentiment reverse recent gains, which would have growth consequences.”
Against the sagging dollar, the pound was up 1.2 percent at $1.2527, reversing the previous day’s losses when the currency fell as investors braced for Britain beginning the formal process of leaving the European Union this week.
The Australian dollar was steady at $0.7629 and the New Zealand dollar rose 0.2 percent to $0.7046 <NZD=D4. (Editing by Simon Cameron-Moore)