• The dollar rebounded against a basket of currencies on Tuesday, as investors renewed bets that monetary policy will continue to diverge between the United States and the euro zone.
Late last month, the European Central Bank prolonged its bond purchases well into 2018, diminishing chances it would raise interest rates next year. Meanwhile, investors expect the U.S. Federal Reserve to raise interest rates next month followed by roughly two more hikes next year.
- The dollar index, which tracks the greenback against six major currencies, was up 0.35 percent at 95.091. The index is just shy of the three-month high of 95.150 hit late last month.
- The euro was 0.31 percent lower to $1.1573 against the dollar. Its session low was $1.1555, its lowest since July 20.
· Federal Reserve Chair Janet Yellen said Tuesday that the Fed's effectiveness critically depends on the nation's confidence that the central bank is acting only in the public's interest.
• U.S. tax reform plans are already transforming municipal debt market dynamics, sparking a sharp rally even as details released by Republicans in the U.S. House of Representatives are likely to shift over the coming days and weeks.
Investors are snapping up municipal bonds and driving yields sharply lower because the current plan, unveiled last Thursday, would slash the amount of tax-exempt debt available.
The House is aiming to vote on its bill next week, a senior Republican said.
• Fitch Ratings predicted that a Republican tax plan would win passage in both chambers, but did not see it offering long-term benefits.
• “Such reform would deliver a modest and temporary spur to growth. ... However, it will lead to wider fiscal deficits and add significantly to U.S. government debt,” Fitch said, revising up its medium-term U.S. government debt forecast.
Republicans in the U.S. House of Representatives forged ahead on Tuesday with legislation to reshape the U.S. tax code, while a top credit-ratings agency said the bill would balloon the budget deficit and give only a temporary boost to the economy.
• Oil settled lower on Tuesday after rising to the highest since July 2015 the previous day, while tension flared between Saudi Arabia and Iran, and the Saudi crown prince tightened his grip on power.
Brent crude futures LCOc1 settled down 58 cents, or 0.9 percent, at $63.69 a barrel, having climbed 3.5 percent on Monday.
U.S. West Texas Intermediate (WTI) crude CLc1 fell 15 cents, or 0.3 percent, to $57.20 a barrel.
Reference: Reuters
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