Dollar retreats on US ratings downgrade; trade tensions persist
The U.S. dollar weakened broadly on Monday, hitting a more than one-week low against the safe-haven yen, Swiss franc and euro as markets digested a surprise downgrade of the U.S. government's credit rating, while trade tensions also weighed.
U.S. Treasury Secretary Scott Bessent said in television interviews on Sunday that President Donald Trump will impose tariffs at the rate he threatened last month on trading partners that do not negotiate in "good faith".
But Moody's action to cut the United States' top sovereign credit rating by one notch on Friday started the ball rolling downward for the dollar. Moody's cited concerns about the U.S. government's growing $36 trillion debt pile.
The move followed similar actions by Fitch in the summer of 2023, and S&P's downgrade in 2011.
The news saw the dollar lose ground against its major rivals following four straight winning weeks when it was boosted by rising optimism for U.S. trade deals and a thaw in relations with China that eased fears of a global recession.
The greenback fell to 144.665 yen, its lowest since May 8 on Monday, and was last down 0.4% at 145.07. It also fell to its weakest level in more than a week at 0.8317 Swiss francs.
The euro, meanwhile, rose 0.7% to $1.1248, after earlier rising to its highest since May 9.
Sterling also gained versus the dollar, adding 0.6% to $1.3363. Earlier in the session the pound climbed to its highest since April 30 as Britain agreed the most significant reset of defense and trade ties with the European Union since Brexit on Monday.
Despite the dollar's losses on Monday, New York Federal Reserve President John Williams said that he has seen no large-scale move away from U.S. assets, and noted that the greenback remains the world's reserve currency.
Australia's dollar was up 0.66% at US$0.6444 following three days of declines ahead of Tuesday's Reserve Bank of Australia policy announcement, with a quarter-point cut widely expected.
The New Zealand dollar also rose, up 0.5% at US$0.5911.
Source: Reuters
