Trump's tax reform could be delayed thanks to defeated healthcare bill

A woman walks past electronic boards showing stock prices outside a brokerage in Tokyo

"There are greater doubts now about large-scale fiscal stimulus under the Trump administration, and on top of that the US inflation numbers have been disappointing", said Societe Generale currency analyst Alvin Tan, in London.

With regard to questions of currency manipulations and Trump's displeasure of a strong dollar, Mr. Mnuchin rejected the idea that the United States is heading for a showdown with global partners in a brand new currency war.

More specifically, the greenback rose to reach a session high of 109.05 after Mnuchin played down US President Donald Trump's interview with the Wall Street Journal, last week; an interview in which the businessman-turned-Commander In Chief said that the dollar was "getting too strong". It had sunk into a five-month trough of 108.130 earlier on Monday amid rising tensions in the Korean Peninsula, which some analysts warned also brought a new dimension to the Japanese relationship. Mnuchin also commented that there is a big difference between talk and action which dampened expectations that the Treasury would be ordered to take action to weaken the U.S. currency directly.

"There was quite strong thinking in the market that the USA would maybe put pressure on Japan in terms of currency manipulation. on that front", said Neil Jones, head of hedge fund FX sales at Mizuho in London.

Mnuchin made the comments in an interview with The Financial Times released on Monday.

Trump admin. declines to brand China a currency manipulator
Treasury released its semi-annual trade report , which failed to label China a currency manipulator as Trump had previously stated.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent in holiday-thinned trade, while Japan's Nikkei shed 0.4 percent. "The yen can not simply continue weakening along with higher stocks under such conditions".

Barring a major shock in the China readings, markets are expected to remain focused on USA data and its possible impact on the pace of interest rate hikes, and concerns over North Korea and the French presidential election. The only way a major legislative effort like a tax code rewrite gets through Congress is when the pain of things like lost deductions and closing loopholes can be balanced by sweeteners like lower rates and greater simplicity.

Nasdaq 100 e-minis were down 12 points, or 0.22 percent, on volume of 33,948 contracts.

USD/JPY now trades just under 109, up from the lows of 108.12 it reached on Easter Monday. Meanwhile, weaker iron ore prices, Australia's key export, also weighed on the currency.

Mnuchin said Monday that Treasury officials were still studying the border adjustment tax, but that there might be other ways to raise the $1 trillion in revenue.

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