WASHINGTON, July 18 (Reuters) - Republican efforts to overhaul or repeal Obamacare collapsed in the U.S. Senate on Tuesday, dealing a sharp setback to President Donald Trump and the Republican Party's seven-year quest to kill President Barack Obama's signature healthcare law.
The disarray in the Republican-controlled Senate rattled financial markets and cast doubt on the chances for getting Trump's other domestic policy priorities, such as tax reform, through a divided Congress.
Saying he was disappointed, Trump suggested at the White House that he might let the insurance markets created under Obamacare go under and then try to work with Democrats on a rescue.
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"We're probably in that position where we'll just let Obamacare fail," Trump told reporters. "We will let Obamacare fail, and then the Democrats are going to come to us."
U.S. Senate Republican leader Mitch McConnell had set a vote on a straight repeal of Obamacare after it became clear he did not have the votes to overhaul the healthcare law, but the new approach unraveled within hours.
Republican Senators Shelley Moore Capito of West Virginia, Susan Collins of Maine and LisaMurkowski of Alaska quickly announced they would not back repeal, dooming the fledgling effort. With Democrats united in opposition, Republicans can only afford to lose two votes to pass the measure in the Senate, where they have a slim 52-48 majority.
"I do not think that it's going to be constructive to repeal a law that at this point is so interwoven within our healthcare system and then hope that over the next two years we will come up with some kind of replacement," Collins told reporters.
McConnell did not immediately say whether he would press ahead with a repeal vote, although it appeared doomed to failure.
As the bill collapsed in the Senate, leaders in the Republican-controlled House of Representatives unveiled a budget plan putting a proposed tax code overhaul on the same partisan procedural path that led to the anti-Obamacare initiative's chaotic downfall late on Monday.
The setback sent the U.S. dollar to a 10-month low against a basket of major currencies as investors worried about the impact on other administration reform efforts.
"The healthcare bill not coming through raises some continued concerns about the ability of Washington to push through favorable fiscal policies," said Lisa Kopp, head of traditional investments at U.S. Bank Wealth Management.
(Writing by John Whitesides; Additional reporting by Caroline Humer in New York and Ginger Gibson, Richard Cowan in Washington; Editing by Mary Milliken and Jonathan Oatis)