The dollar fell to its lowest in a week against a basket of major currencies on Thursday after Republicans in the U.S. House of Representatives released proposals to overhaul the tax code.
The legislation called for slashing the corporate tax rate to 20 percent from 35 percent and reducing the number of tax brackets for individuals, according to a summary document obtained by Reuters.
Analysts said the proposals put forth were both unlikely to gather sufficient support in Congress and unlikely to have a significant impact on the U.S. economy. "Massive" tax cuts had been a major campaign promise of U.S. President Donald Trump.
"The market believes that the likelihood of tax reform passing quickly is diminished," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange. "... the market believes that it's not enough to be meaningful. It's doubtful that it'll be meaningful for the overall GDP of the country."
Cutting taxes would increase spending, drive inflation and U.S. interest rates higher, and make the dollar more attractive. If the tax cuts fail to pass or do not provide an incentive for increased spending, they would not support a stronger dollar.
The dollar index fell to 94.411, its lowest since Oct. 26. It had earlier risen, almost touching its highest level since mid-July. The dollar was last trading at 94.72.
The euro hit its highest level in a week against the dollar, rising to $1.1687. It was last trading at 1.1657.
The dollar also hit a session low against the Japanese after the tax cut proposal's release, falling to 113.55 yen, later recovering to 114.08.
The greenback largely held its gains against the British pound, which fell more than 1 percent after the Bank of England raised interest rates for the first time in more than a decade but said it sees only gradual rises ahead.
The BoE said its nine rate-setters voted 7-2 to increase its benchmark Bank Rate to 0.50 percent from 0.25 percent, but it expected only "very gradual" further increases would be needed over the next three years.
The pound initially rose on the announcement, climbing to as high as $1.3279, from around $1.3215 beforehand.