Dollar retreats ahead of U.S. tax bill

The Fed left interest rates unchanged as widely expected, but further sharpened expectations for a year-end rate hike by highlighting "solid" economic growth and a strengthening labor market.

Thursday's robust U.S. ADP private employment report was the latest in a list of strong indicators that have backed the Fed's quest to normalize monetary policy.

The dollar's advance, however, was curtailed as other factors pertaining to U.S. fiscal and monetary policy came into focus.

"The dollar was buoyed by the Fed's statement but the impact was limited as the decision and its statements produced little surprise," said Shin Kadota, senior strategist at Barclays (LON:BARC) in Tokyo.

"The likelihood of (Fed Governor Jerome) Powell being nominated as the next Fed chair is capping the dollar. The delay in the tax bill announcement is also a potential sign of internal squabbles."

U.S. President Donald Trump plans to nominate Governor Powell, seen as less hawkish than other candidates, as the next chair of the Federal Reserve, a source familiar with the matter said on Wednesday. The announcement is expected on Thursday.

After an embarrassing one-day postponement of the bill's unveiling on Wednesday, U.S. lawmakers have made plans for a measure that will seek up to $6 trillion in tax cuts over 10 years but is not likely to spell out in detail how they should be offset.

The dollar has drawn support since September on tax cut hopes and some of the "tax reform trades" that lifted the currency could be unwound if the bill reveals discord among lawmakers, Kadota at Barclays said.

The euro was 0.35 percent higher at $1.1658 .

Bloomberg