NEW YORK (Reuters) - The dollar rose to a more than one-month high against a basket of currencies on Wednesday, as optimism about U.S. fiscal reforms boosted sentiment in favour of the greenback.
The dollar index, which tracks the greenback against six major currencies, was up 0.47 percent at 93.401, after touching 93.607, the highest since Aug. 23.
“The dollar is rising because the market is hopeful for some positive comments in regards to progress on tax reform from President Trump,” said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.
“The dollar has been trading firmly throughout the day as a result of that.”
U.S. President Donald Trump on Wednesday proposed the biggest U.S. tax overhaul in three decades, offering to cut taxes for most Americans but prompting criticism that the plan favors the rich and companies and could add trillions of dollars to the deficit.
The proposal would lower corporate income tax rates, cut taxes for “pass-through” businesses, reduce the top income tax rate for individual Americans and scrap some widely used tax breaks including one that benefits people in high-tax states dominated by Democrats.
Trump was hitting the road on Wednesday to sell the plan with an appearance in Indianapolis.
News of better-than-expected U.S. core capital goods data boosted the greenback, which had risen on Tuesday after Federal Reserve Chair Janet Yellen said the central bank needed to continue gradual interest rate hikes despite broad uncertainty about the path of inflation.
New orders for U.S.-made capital goods increased more than expected in August and shipments maintained their upward trend, pointing to underlying economic strength even as Hurricanes Harvey and Irma are likely to dampen growth.
“Generally the market has been leaning on the short side with respect to the dollar. I think there has been some short covering,” said Mazen Issa, senior FX strategist, at TD Securities in New York.
Speculators’ net short bets on the U.S. dollar grew in the latest week to the highest total since January 2013.
The euro hit a more than one-month low as an ongoing dollar short squeeze and the German election’s outcome encouraged investors to take profits on one of the best-performing currency trades this year.
The Canadian dollar weakened to near a four-week low against its U.S. counterpart after Bank of Canada Governor Stephen Poloz struck a cautious note about the economy.
Reporting by Saqib Iqbal Ahmed; Editing by Richard Chang