Investing.com - The dollar held onto gains against other major currencies in quiet trade on Friday, as hopes for a major U.S. tax reform continued to support amid ongoing speculation over the next head of the Federal Reserve.
The greenback was boosted after the U.S. Senate late Thursday approved a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue tax-cut plans without Democratic support.
The Republican-controlled Senate voted for the budget measure by 51 to 49, which would add up to $1.5 trillion to the federal deficit over the next ten years in order to pay for proposed tax cuts.
Meanwhile, speculation over who will replace Janet Yellen as head of the Fed persisted.
Reports that U.S. President Donald Trump was leaning toward Fed Governor Jerome Powell, who is perceived as a less hawkish candidate, had temporarily weighed on the dollar.
Trump concluded interviews on Thursday with the five candidates, including Janet Yellen, he is considering to chair the Fed. He could announce a decision as early as next week.
EUR/USD dropped 0.35% to 1.1810, while GBP/USD edged up 0.18% to trade at 1.3183.
The pound rebounded from earlier losses after German Chancellor Angela Merkel said at a meeting of European Union leaders in Brussels that Brexit talks had not reached a stalemate and were in fact progressing. She claimed it was ‘absurd’ to think they would be broken off.
Meanwhile, the euro remained pressure as the Spanish government was set to suspend Catalonia’s autonomy and impose direct rule after the region’s president refused to abandon the push for independence on Thursday.
The announcement came after Carles Puigdemont threatened a unilateral declaration of independence if the Spanish government did not agree to talks on the issue.
The yen and the Swiss franc remained lower, with USD/JPY up 0.63% at 113.24 and with USD/CHF climbing 0.55% to 0.9818.
Market participants were looking ahead to Japan's general election, scheduled on Sunday. Recent polls suggest that Japanese Prime Minister Shinzo Abe's ruling coalition is on track to match the two-thirds "super majority" it held in parliament's lower house before the snap election was called.
The Australian and New Zealand dollars were lower with AUD/USD down 0.47% at 0.7842 and with NZD/USD sliding 0.54% to a five-month low of 0.6990.
Investors were still digesting news of a new Labor coalition, formed by New Zealand Prime Minister-elect Jacinda Ardern.
Meanwhile, USD/CAD advanced 0.58% to trade at 1.2557 after data showed that Canada's inflation rose less than expected last month, while retail sales declined more than anticipated.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.37% at 93.34 by 08:45 a.m. ET (12:45 GMT).