FOREX-Dollar slips in Asia as market frets on US fiscal outlook

By Wayne Cole

SYDNEY, March 27 (Reuters) - The U.S. dollar took a spill in early Asian trade on Monday as investors in the region fretted about the chances of U.S. fiscal stimulus following the defeat of President Donald Trump's healthcare package.

The move was exaggerated by a very thin market with the dollar down over half a percent against the yen at one stage to a 110.78 low and was last trading at 110.83.

The euro initially hopped to a near four-month peak at $1.0846 and was last up 0.37 percent at $1.0837. Against a basket of currencies, the dollar was down 0.17 percent at 99.454.

Traders said the market was divided on what the failure of Trump's healthcare bill meant for the outlook for U.S. tax cuts and infrastructure spending.

"There is a widespread perception that failure to pass the healthcare bill somehow derails the rest of the Trump agenda," said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

"We think linking this particularly difficult legislative undertaking with the rest of the Trump is flawed," he argued. "It actually presents a scenario where tax reform can potentially be accelerated."

This view was offered as one reason Wall Street rallied late Friday even as the healthcare bill went down in flames.

Others, however, including much of the mainstream press wondered how Trump would get any major changes through such a fractious Congress. It was notable that futures for the S&P 500 eased 0.35 percent in early trade on Monday.

"It clearly highlights that divides remain, and it means that the policy paralysis that was often evident over recent years could linger," wrote analysts at ANZ in a note.

"With fiscal policy uncertainty rising again the risk is that business and consumer sentiment reverse recent gains, which would have growth consequences." (Editing by Lincoln Feast)