The dollar index fell for a third consecutive session, sliding to 99.7 on Wednesday—its lowest level in two weeks—as traders turned their attention to the upcoming G7 finance ministers' summit for potential signals on US currency policy.
Dollar down for the third straight day
Market participants speculated that the US administration might be increasingly tolerant of a weaker dollar, especially amid reports that Japanese and South Korean officials were preparing to hold currency discussions with the US, raising concerns about coordinated intervention or policy shifts aimed at rebalancing exchange rates.
The speculation comes at a time of mounting fiscal uncertainty in the United States. President Trump has been pressing congressional Republicans to rally behind a sweeping tax-cut proposal, which he argues is essential for economic growth and competitiveness. However, the bill has faced internal resistance, with several key lawmakers expressing concerns over its long-term fiscal impact and threatening to block its passage unless significant revisions are made. The legislative gridlock has heightened fears about the country's fiscal trajectory, especially as borrowing costs rise.
Moody's downgrade hit the sentiment
Further undermining confidence in the dollar, Moody’s Investors Service downgraded the US credit rating last Friday from Aaa to Aa1, citing deteriorating public finances, the continued expansion of the federal budget deficit, and a lack of political consensus on how to stabilize the debt burden. The downgrade, which leaves the US without a top-tier rating from any major global credit agency, triggered a wave of selling pressure across currency markets.
As a result, the dollar weakened broadly, posting its sharpest losses against the Japanese yen and the euro. The yen, in particular, saw renewed safe-haven demand amid geopolitical uncertainties and currency market jitters in Asia. Meanwhile, the euro gained ground on improving economic sentiment in the Eurozone and expectations that the European Central Bank may begin pivoting toward a more neutral monetary stance later in the year.
