NEW YORK (Reuters) - The dollar rose against most currencies on Tuesday, helped by upbeat U.S. housing data, but gains were limited by doubts about the overall impact of a major U.S. tax overhaul plan on the economy.
The Republican-controlled U.S. House of Representatives approved sweeping, debt-financed tax legislation on Tuesday, sending the bill to the Senate, where lawmakers were due to take up the package later in the evening.
Passage was all but certain in the Republican-controlled Senate, as well.
The dollar, however, trimmed gains versus the yen and held losses against the euro after the House approved the bill.
“Any boost to the economy would be small and there is nothing in the final bill to change that view,” said London-based Andrew Hunter, U.S. economist, at Capital Economics.
Stock markets around the world surged this week on U.S. tax cut hopes, but the greenback has remained muted. Traders believe most of the positive impact of the cuts to corporate taxes have already been priced in, while expectations the overhaul would trigger a wave of repatriated dollars were overplayed.
“There is little evidence linking corporate tax cuts to stronger growth,” Hunter said. “There are few examples either historically in the U.S. or internationally of lower corporate taxes resulting in a significant and sustained boost to business investment.”
The tax plan, designed in part to give U.S. multinationals a reason to repatriate the roughly $2.6 trillion in profits held by their foreign subsidiaries, would slash tax rates on such previously accumulated earnings.
“We think FX markets are less fazed by the bill; whether it will induce a material shift in investment and the balance of payments remains unclear,” said Mazen Issa, senior FX strategist at TD Securities in New York.
The greenback earlier gained ground after data showed domestic home construction unexpectedly rose to a 13-month peak in November with the building of single-family homes hitting a 10-year high.
In late trading, the dollar rose 0.3 percent against the yen to 112.92 yen JPY=. It was little changed against the Swiss franc CHF=, but higher versus sterling GBP= as well as the Australian AUD=, Canadian CAD=, and New Zealand dollars NZD=.
Against the euro, however, the dollar was weaker. The euro was last at $1.1842 EUR=, up 0.5 percent, benefiting from an overall rise in risk appetite with U.S. Treasury yields higher on the day.
Europe’s shared currency has gained more than 12 percent against the dollar so far this year and is on track to post its strongest yearly performance since 2004.
Currency bid prices at 3:12PM (2012 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar EUR= $1.1844 $1.1781 +0.53% +12.66% +1.1849 +1.1777
Dollar/Yen JPY= 112.9200 112.5300 +0.35% -3.38% +113.0700 +112.5100
Euro/Yen EURJPY= 133.75 132.58 +0.88% +8.62% +133.9100 +132.6000
Dollar/Swiss CHF= 0.9854 0.9856 -0.02% -3.18% +0.9878 +0.9835
Sterling/Dollar GBP= 1.3382 1.3380 +0.01% +8.48% +1.3401 +1.3333
Dollar/Canadian CAD= 1.2882 1.2860 +0.17% -4.08% +1.2918 +1.2850
Australian/Doll AUD= 0.7662 0.7661 +0.01% +6.20% +0.7683 +0.7646
Euro/Swiss EURCHF= 1.1671 1.1613 +0.50% +8.90% +1.1676 +1.1611
Euro/Sterling EURGBP= 0.8850 0.8804 +0.52% +3.90% +0.8865 +0.8802
NZ NZD= 0.6988 0.6993 -0.07% +0.68% +0.7018 +0.6978
Dollar/Norway NOK= 8.3525 8.3573 -0.06% -3.29% +8.3883 +8.3524
Euro/Norway EURNOK= 9.8938 9.8465 +0.48% +8.89% +9.9089 +9.8491
Dollar/Sweden SEK= 8.3929 8.4349 +0.03% -7.85% +8.4457 +8.3951
Euro/Sweden EURSEK= 9.9409 9.9380 +0.03% +3.77% +9.9735 +9.9334
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Tommy Wilkes in London; Editing by Meredith Mazzilli and Chizu Nomiyama