* Tax hopes boosts U.S. dollar
* Cost to borrow short-term dollars surges (Recasts with dollar move, updates prices)
By Karen Brettell
NEW YORK, Dec 15 (Reuters) - The U.S. dollar rose on Friday as Republican negotiators in the U.S. Congress put the finishing touches on a sweeping tax overhaul, raising expectations that the bill would be passed by year-end.
Representative Kevin Brady, chairman of the tax-writing House Ways and Means Committee, told reporters that Republicans on the House-Senate negotiating committee working on the revamped bill had signed the finished product and the details would be published when the full House convenes at 5:30 p.m. EST (2230 GMT).
It comes after two Republicans sought changes to the proposed legislation.
“People will be eyeing up the U.S. tax plan. There are expectations building they could have it done by next week, if not that pushes if off until next year,” said Mark McCormick, North American head of foreign exchange strategy at TD Securities in Toronto.
The tax bill needs a simple majority to pass in the Senate, in which Republicans hold just 52 of the 100 seats, and no Democrats are expected to support it.
The dollar index against a basket of six major currencies rose 0.49 percent to 93.944.
Many investors expect that the tax overhaul may boost U.S. growth, leading to more interest rate hikes and a higher dollar.
Tax legislation is seen as the last major event this year as investors wind down trading activity before the Christmas and New Year holidays.
“Markets are really consolidating at this point into holiday trading,” McCormick said.
The cost for banks to borrow short-term dollar funds from other banks, meanwhile, surged to its highest level since 2012 as financial institutions scrambled to secure funding before thinning trading volumes.
The cross currency basis swap “is moving in the U.S. direction as people seek funding to cover them through the end of the year,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The three-month euro-dollar cross currency basis swap , which measures the premium banks have to pay to swap euros into dollars, traded at 100 basis points. It has widened from under minus 52 basis points at the beginning of the month.
The rising swap cost was not yet seen impacting the greenback, though it could be negative for the dollar, said Chandler.
“It’s very expensive for Europeans, say financial institutions, to buy Treasuries ... so it’s going to deter people from buying Treasuries and its going to encourage dollar-based investors to invest overseas,” Chandler said. (Editing by Susan Thomas and Cynthia Osterman)