Dollar Weakens as All Eyes on US Deficit Spending
The dollar traded weaker even as yields on Treasuries rose following a relatively soft auction of US 20-year bonds, as investors demanded a higher premium to hold long-term US debt amid concerns about the US budget and fiscal situation.
The Bloomberg Dollar Spot Index fell 0.4%, extending its decline to a third day
“The market has reacted very negatively to a poor US Treasury auction,” wrote George Saravelos, Deutsche Bank’s global head of FX strategy. “The most troubling part of the market reaction is that the dollar is weakening at the same time”
“At the core of the problem is that foreign investors are simply no longer willing to finance US twin deficits at current level of prices,” he explained
The White House amped up the pressure on Republicans on Wednesday urging lawmakers to quickly approve President Donald Trump’s signature tax bill, adding that a failure to do so would be the “ultimate betrayal”
GBP/USD rose by as much as 0.6% to 1.3469
The pound pared gains to 0.3%, trailing behind nearly all peers in the Group of 10
UK inflation jumped more than forecast to its highest rate in over a year as households were hit by a raft of price increases, prompting investors to pare bets on rate cuts from the Bank of England
USD/JPY fell 0.6% to 143.62
Japan’s Finance Minister Katsunobu Kato said on Tuesday that he’s arranging a bilateral meeting with US Treasury Secretary Scott Bessent this week to discuss topics including currency matters
EUR/USD advanced for a third day, up by 0.4% to 1.1327
ECB Governing Council member Martins Kazaks said interest-rate cuts are nearing an end, assuming the base case for inflation stabilizing at 2% over the coming months comes to pass
USD/NOK fell as much as 1.3% to 10.1254, traded down 0.8% later in the day
The Norwegian krone was outperforming peers as oil prices swung.
Source : Bloomberg
