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(Bloomberg) -- The dollar continued its saw-tooth trading pattern of the week with a small loss as fresh talk about U.S. tax reform filled a vacuum caused by an empty U.S. data calendar.

Trading flows and ranges were mostly modest in major pairs. The yen rose to a fresh November high versus the greenback as stale positions were unwound, while the pound fell amid fresh political concerns surrounding Theresa May’s cabinet. Emerging market currencies gained amid an early rally in Treasuries and core European government bonds, though peripheral EGBs remained under pressure.

  • The Bloomberg dollar index declined ~0.1% overall as USD gains vs an ailing pound offset broad, but modest, losses elsewhere; the dollar was mixed against other G-10 peers. There are no U.S. data or Fed speakers scheduled for Wednesday. Dollar losses began in the Asian session after a report that a drop in the corporate-tax rate could be delayed until next year, potentially adding another sticking point to President Trump’s reform agenda, as House lawmakers continue to haggle over details of a Republican tax proposal
  • USD/JPY fell to a fresh 8-day low at 113.40 in morning trading, weighed by sales of GBP/JPY and EUR/JPY, both of which also dropped to session lows. Traders attributed the move to unwind of stale positions, especially in USD/JPY, where dollar advances above 114.00 have been thwarted by Japanese exporters and other USD sellers. Nonetheless, USD is seen as an attractive buy on dips as domestic investors and life insurers accumulate the currency for offshore investments, said Neil Jones, head of institutional FX sales at Mizuho USD/JPY may find tech support at 112.96 from the Oct. 31 low, while EUR/JPY may find support near 131.00 from the cloud base on Ichimoku charts
  • GBP/USD fell to a fresh low at 1.3087 in recent trading, approaching technical support from the little-watched 133-DMA that has underpinned recent declines in the pair. Stop-loss sell orders are in place below 1.3040, a trader in London said
  • EUR/USD trading at ~1.1583 vs 1.1611 session high seen overnight; EUR touched a new low at 1.1579 as EUR/GBP adds support and as the USD tone remains mixed. Offers to sell EUR are said to be layered above 1.1630 as traders look to sell rallies in the pair amid divergent Fed/ECB monetary policies. At the same time, EUR declines toward 1.1550 and 1.1500 are expected to be underpinned by option-related demand and lack of strong selling conviction, until current dynamics shift more strongly in favor of the USD

To contact the reporter on this story: Dennis Pettit in New York at dpettit5@bloomberg.net.

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang, Vivien Lou Chen

©2017 Bloomberg L.P.

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