Investing.com - The dollar was nursing losses near-multi-month lows against a currency basket on Wednesday in the wake of a steep selloff sparked by fears that U.S. President Donald Trump is having difficulties implementing his policy agenda.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, ticked up 0.14% to 94.56 by 03.30 a.m. ET (07.30 a.m. GMT).
The index touched a low of 94.27 on Tuesday, the lowest trough since August 26, 2016 and is down more than 7% for the year to date.
The dollar sold off after Republican lawmakers pulled the plug on the latest version of a contentious bill to replace Obamacare, delivering a major policy blow to the Trump administration.
The failure to deliver on healthcare reform indicated that Trump’s other legislative efforts, such as overhauling the tax code and implementing fiscal stimulus could face difficulties.
Recent weak U.S. inflation data and the prospect that other major central banks may join the Federal Reserve in tightening monetary policy have also fed into weakness in the dollar.
The Bank of Canada raised rates for the first time in seven years last week and officials at the European Central Bank and the Bank of England have indicated that they may tighten policy in the near term.
The ECB is to hold its next policy meeting on Thursday.
The dollar index rallied to 14-year highs in the wake of November’s presidential election fueled by optimism that Trump’s proposed policies would bolster growth and prompt the Fed to speed up the pace of rate hikes, making the dollar more attractive to yield seeking investors.
The dollar was steady against the yen, with USD/JPY at 112.05, up from a Wednesday low of 111.67.
The dollar’s losses against the yen were held in check amid expectations that the Bank of Japan will lag behind other central banks in scaling back its massive monetary stimulus program.
The euro was a touch lower, with EUR/USD slipping 0.19% to 1.1531, not far from Wednesday’s 14-month highs of 1.1582 as investors remained cautious ahead of the upcoming ECB meeting.
Sterling was little changed against the dollar, with GBP/USD at 1.3039.
Meanwhile, the Australian dollar was slightly higher, with AUD/USD ticking up 0.13% to 0.7926 a day after it jumped to two-year highs as the minutes from the central bank's last policy meeting showed it turning more upbeat on the economic outlook.