TOKYO — The US dollar edged lower on Wednesday, extending a two-day slide against major peers, as President Donald Trump failed to convince Republican holdouts to back his sweeping tax bill.
Traders were also wary of US officials potentially angling for a weaker dollar at Group of Seven finance minister meetings currently underway in Canada.
Developments in Trump’s global tariff war, which have swung currencies wildly in recent months, have slowed considerably this week, even as the clock ticks down to the end of 90-day tariff respites for US trade partners in the absence of new trade deals.
While markets remain optimistic that the White House is eager to get trade flowing again on a sustained basis, talks with close allies Tokyo and Seoul appear to have lost momentum recently.
All this has combined to keep the dollar under pressure and US Treasury yields rising, as the “sell America” theme continues to inform investment decisions, if in a less dramatic fashion than earlier this month.
A Moody’s downgrade of the US sovereign debt rating on Friday may have only had a limited impact on markets, but it has added to the narrative of less faith in US assets as safe havens.
“Tariff rates are now lower, but not low, and the same can be said about recession risks in the US,” Goldman Sachs analysts wrote in a research note.
“But as recession risks have compressed, risks from higher rates are growing,” they said. “The US still faces the worst growth-inflation mix of the major economies, and as the fiscal bill makes its way through Congress, eroding US exceptionalism is proving – literally – costly at a time of large funding needs.”
