Dollar cheered by tax cut progress, outshone by bitcoin

Reuters SYDNEY | Updated on January 09, 2018 Published on November 29, 2017


The dollar held firm on Wednesday after Wall Street shot to record peaks amid signs of progress on US tax cuts, while bitcoin topped $10,000 on a host of exchanges as the frenzy for cryptocurrencies showed no sign of fading.

Asian share markets were not as jubilant, checked by caution over the latest missile test by North Korea and concerns at recent softness in Chinese shares.

MSCI's broadest index of Asia-Pacific shares outside Japan was down a fraction, while China's blue chip index slipped 1 per cent. Among the better performers, Japan's Nikkei added 0.4 per cent, while Australia's main index rose 0.5 per cent.

The prospects for a US tax cut seemed to improve after Senate Republicans rammed forward their Bill in a partisan committee vote that set up a full vote by the Senate as soon as Thursday, although details of the measure remained unsettled.

Republican leaders conceded that they have yet to round up the votes needed for passage in the Senate, where they hold a narrow 52-48 majority. Some analysts, however, did warn of the risks of unintended consequences if the package was passed.

“Tax cuts will mainly boost the demand side of the economy at a time when the economy has little spare capacity,” said Jeremy Lawson, chief economist at Standard Life Investments.

“For that reason, the package will primarily bring forward activity with most of the stimulus eventually offset by the Federal Reserve lifting interest rates more quickly.”

Fed chair nominee Jerome Powell, in his Senate confirmation hearing on Tuesday, had said the case for a December rate hike was coming together, though he dodged comment on the tax proposals.

Bubbly bitcoin

Powell also hinted at a lighter touch for bank regulation, saying current rules were already tough enough.

The S&P financial sector soared 2.6 per cent in reaction, its biggest daily gain since March 1. That helped the Dow climb 1.09 per cent, while the S&P 500 rose 0.99 per cent and the Nasdaq added 0.49 per cent.

Adding to the good cheer was data showing US consumer confidence surged to a near 17-year high in November, while home prices rose sharply in September, which should underpin consumer spending.

All of which helped the dollar regain some ground. Against a basket of currencies it was steady at 93.219 and off a two-month trough of 92.496 touched on Monday.

The dollar likewise edged up to 111.54 yen and away from a 10-week low of 110.85, while the euro backed off to $1.1848. That paled in comparison to bitcoin which flew to $10,200 on BitStamp, a major trading platform based in Luxembourg.

The latest surge brought its gains for the year so far to over 950 percent, leaving more than a few observers baffled.

“The market is very illogical. There's no way to rationally value bitcoin as an asset,” said Thomas Glucksmann, head of marketing at Hong Kong exchange Gatecoin.

“There's nothing that makes sense because there's no fundamentals behind bitcoin. What people are buying into is the idea of how this technology can be used in the future.”

In old-fashioned commodity markets, gold looked rather dull at $1,295.00 an ounce. Oil eased amid uncertainty over the outcome of OPEC talks and a surprise rise in crude inventories. U. crude dipped 32 cents to $57.67, while Brent crude oil lost 43 cents to $63.18 a barrel.

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Published on November 29, 2017
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