* Dollar heads higher for second day after Trump tax
* Eyes on meeting with Japanese PM in Washington
* Chinese trade data supports better global mood
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, Feb 10 The dollar hit its highest level
in 10 days against the yen and a basket of currencies ahead of a
meeting of the U.S. and Japanese leaders on Friday, putting it
on course for its best week since mid-December.
U.S. President Donald Trump's promise to announce within
weeks a major tax reform plan cooled some of the market nerves
that have dominated currency markets for weeks, reinvigorating
While Trump may discuss his concerns over a strong dollar
with his Japanese counterpart, it is expected that whatever is
said publicly after the meeting will focus on trade and
"Currency policy may not be a dominant topic at the summit,
and that would be positive for the dollar," Shusuke Yamada,
chief Japan FX strategist at Bank of America-Merrill Lynch,
The dollar has fallen steadily against the euro and yen
since mid-December as Trump focused on protectionist trade
policies, ran into trouble with some of his executive orders,
and appeared to step away from the United States' long-held
strong dollar policy.
But Trump spoke out on stimulus measures on Thursday,
promising a "phenomenal" tax plan in a White House meeting with
airline executives, although he did not offer specifics other
than citing the need for a lower tax burden on businesses.
The dollar index against a basket of major currencies was up
another 0.2 percent in early trade in Europe on Friday, trading
at 100.86 - its highest since Jan 30.
Against the yen, the chief gainer from a wobble in global
risk appetite earlier this week, it was up almost half a percent
at 113.75 yen. The euro was little changed at $1.0666
after losing 0.4 percent the previous day.
"The dollar is supported by the Trump announcement on
taxation," said Thu Lan Nguyen, a currency strategist with
Commerzbank in Frankfurt. "But maybe investors will remain
cautious for the time being. Since we saw what happened with the
(blocked) travel ban ... uncertainty is still quite high about
what Trump will do and what he can get through."
The euro is on track to shed more than 1 percent in a week
dogged by a perceived rise in the political risks facing the
euro zone. Nguyen said she expected more hedging of currency
exposure to April's French elections in the weeks ahead.
Three-month implied volatility - an options contract which
allows investors to insure themselves against swings in the
currency over that period - has jumped to the highest in a month
as a result.
Dealers also said that Trump's backing down on surprise
early criticisms of China's "One China" policy had helped risk
Trade numbers out of the world's second largest economy were
also strong, helping the Australian dollar gain up to 0.4
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(Additional reporting by Shinichi Saoshiro in TOKYO Editing by