HONG KONG: The dollar built on its recovery against the yen on Thursday (Sep 14) on rekindled hopes for Donald Trump's tax plan but most Asian markets retreated on profit-taking following gains earlier in the week.
Wall Street provided another positive lead with a second-straight record for all three main indexes after Republicans set a September 25 target for releasing a plan to slash taxes while surging oil prices boosted energy firms.
The announcement out of Washington fanned optimism Trump's market-friendly agenda to boost the economy could see the light of day.
World markets soared for months after Trump's November election win on hopes for such reforms but his struggles to push through any major legislation since taking office, as well as a series of controversies, have forced him to put his plans on the backburner.
"Nothing concrete has been announced, but there is a growing feeling that something will be done amid Trump's bipartisan approach along with the need for Republicans to score some runs ahead of next year's election," Rodrigo Catril, currency strategist at National Australia Bank, said in a commentary.
Investors were last week surprised when the tycoon reached a deal with Democrats to raise the US debt limit and avert a government shut-down, fanning hopes he can strike further agreements in future.
The greenback bounced back above ¥110, having fallen last week to a 10-month low around ¥107.30 on worries about North Korea's missile and nuclear tests.
EYES ON BOE
In Asian trade the dollar extended gains against the Japanese unit, while it was also building on a rally against the euro.
The single currency was stuck below US$1.19 Thursday, having flirted with US$1.21 just a week ago.
Traders will be keeping an eye on the Bank of England's policy meeting later in the day following data showing inflation hit 2.9 per cent in August, well over its two percent target which boosted sterling and raised speculation of a possible interest rate hike.
"While a rate hike at the meeting is very unlikely, central banks have surprised us in the past and given how other central banks (ECB, Bank of Canada) are exploring tighter monetary policy, it remains a possibility, albeit a small one I would say," said OANDA senior market analyst Craig Erlam.
Equity markets, however, were unable to maintain momentum as investors took profits from a healthy start to the week that came on the back of relief that North Korea tensions had eased and Hurricane Irma had not been as devastating to Florida as feared.
Tokyo's Nikkei fell 0.3 per cent after climbing for three straight days as the softening yen was unable to fend off profit-takers.
Hong Kong slipped 0.4 per cent and Shanghai pared early gains to end down 0.4 per cent after a disappointing print on Chinese factory production, retail sales and state investment.
Sydney lost 0.1 per cent and Singapore eased 0.3 per cent but Seoul jumped 0.7 percent on a weaker won. Wellington eased but Jakarta, Manila and Taipei were higher.
In early European trade London and Frankfurt each fell 0.2 percent, while Paris shed 0.3 per cent.
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: DOWN 0.3 per cent at 19,807.44 (close)
Hong Kong - Hang Seng: DOWN 0.4 per cent at 27,777.20 (close)
Shanghai - Composite: DOWN 0.4 per cent at 3,371.43 (close)
London - FTSE 100: DOWN 0.2 per cent at 7,368.00
Euro/dollar: DOWN at US$1.1880 from US$1.1885 at 2100 GMT
Dollar/yen: UP at ¥110.50 from ¥110.47
Pound/dollar: UP at US$1.3216 from US$1.3208
Oil - West Texas Intermediate: DOWN 13 at US$49.17 per barrel
Oil - Brent North Sea: DOWN 19 cents at US$54.97
New York - DOW: UP 0.2 per cent at 22,158.18 (close)