Investing.com - The dollar was modestly higher against a basket of the other major currencies on Tuesday as hopes for major tax cuts in the U.S. continued to underpin demand for the greenback.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.18% to 93.22 by 03:38 AM ET (08:38 AM GMT).
The dollar rose Monday after the U.S. Senate passed a tax overhaul package over the weekend.
Demand for the dollar continued to be supported by expectations that tax cuts for corporations will stimulate the U.S. economy, and also drive Treasury yields higher, as the government becomes more dependent on debt due to reduced tax income.
Some investors also believe the boost to the economy will prompt the Federal Reserve to raise interest rates at a faster pace. Expectations of higher rates tend to boost the dollar, as they make the U.S. currency more attractive to yield-seeking investors.
Republicans are aiming to send a final tax bill to the White House before Christmas, with the House and Senate working to reconcile separate versions of the plan.
The dollar was higher against the yen, with USD/JPY rising 0.18% to 112.61.
The euro was a touch lower, with EUR/USD slipping 0.13% to 1.1850.
Sterling was sharply lower, with GBP/USD down 0.71% to 1.3385 after the UK and the European Union failed to reach an agreement to move to the next stage of Brexit talks.
The pound was also lower against the euro, with EUR/GBP climbing 0.61% to 0.8854.
Meanwhile, the Australian dollar was boosted by strong domestic retail sales data, with AUD/USD up 0.59% to 0.7642.
The Aussie showed little reaction to the Reserve Bank of Australia’s decision to keep rates on hold at a record low 1.5%, in what was a widely anticipated decision.
The New Zealand dollar followed the Aussie higher, with NZD/USD rising 0.25% to 0.6877.