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Dollar extends gains on US tax hopes but Asia markets sink

 

The dollar built on its recovery against the yen Thursday 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 yen, having fallen last week to a 10-month low around 107.30 yen on worries about North Korea's missile and nuclear tests.

- Eyes on BoE (Shenzhen: 000725.SZ - news) -

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 $1.19 Thursday, having flirted with $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 percent 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 percent after climbing for three straight days as the softening yen was unable to fend off profit-takers.

Hong Kong slipped 0.4 percent and Shanghai pared early gains to end down 0.4 percent after a disappointing print on Chinese factory production, retail sales and state investment.

Sydney lost 0.1 percent and Singapore eased 0.4 percent 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 percent.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 0.3 percent at 19,807.44 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 27,777.20 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,371.43 (close)

London - FTSE 100: DOWN 0.2 percent at 7,368.00

Euro/dollar: DOWN at $1.1880 from $1.1885 at 2100 GMT

Dollar/yen: UP at 110.50 yen from 110.47 yen

Pound/dollar: UP at $1.3216 from $1.3208

Oil - West Texas Intermediate: DOWN 13 at $49.17 per barrel

Oil - Brent North Sea: DOWN 19 cents at $54.97

New York - DOW: UP 0.2 percent at 22,158.18 (close)