US Dollar Index Falls Towards 99.50 as Fed Officials Express Economic Concerns
The US Dollar Index (DXY), which tracks the US Dollar (USD) against a basket of six major currencies, extended its decline for the third straight session and traded lower around 99.70 during the Asian trading session on Wednesday (05/21). The greenback depreciated, pressured by cautious remarks from Federal Reserve (Fed) officials on the economic outlook and business sentiment.
San Francisco Fed President Mary C. Daly and Cleveland Fed President Beth Hammack expressed growing concerns about the US economy. While key economic indicators remained strong, both officials pointed to a decline in business and consumer confidence, attributing some of the shift in sentiment to US trade policy.
Meanwhile, none of the Fed officials agreed to ease the tightening amid the ongoing economic slowdown in the United States (US). On Monday, Atlanta Fed President Raphael Bostic said he favors one interest rate cut in 2025. Bostic also warned that inconsistent and arbitrary tariff policies introduced during the Trump administration risk disrupting U.S. trade logistics, which relies heavily on large-scale imports to meet domestic demand.
The U.S. dollar has struggled since Moody’s announced a downgrade of the U.S. credit rating from Aaa to Aa1. The move follows similar downgrades by Fitch Ratings in 2023 and Standard & Poor’s in 2011.
Moody’s also forecasts U.S. federal debt will rise to about 134% of GDP in 2035, up from 98% in 2023, with the budget deficit projected to widen to nearly 9% of GDP. The decline is due to rising debt service costs, expanding entitlement programs, and declining tax revenues.
Source: FXSTreet
