NEW YORK: On an upswing in recent months, the fate of the U.S. dollar hinges on whether Congress passes major tax reform, with future Federal Reserve interest rate rises already priced in, according to the latest Reuters poll of currency strategists.
But an agreement to overhaul the complex U.S. tax code – giving the largest American tax cut since modern corporate tax began more than a century ago – is by no means certain by the late November deadline that the Republican Party says it is aiming for.
Indeed, optimism about the dollar, which had its best month since February in October, has wilted following a Washington Post report on Tuesday that suggested Republican leaders were considering a one-year delay in the implementation of a big corporate tax cut to comply with Senate rules.
The Republicans were dealt another setback after the Democrats’ recorded a comprehensive political victory in Virginia on Tuesday.
The consensus view from the latest poll of over 60 foreign exchange strategists, taken Nov 3-8, showed the dollar was expected to hold steady over the coming year. However, the lowest forecasts for the dollar were even more pessimistic than last month against several currencies.
While about 80 percent of over 50 strategists who answered an extra question said significant tax reform would help the dollar, not everyone was convinced that Congress, which has failed to pass any major legislation this year, will deliver.
