The U.S. dollar took a significant hit in global markets on Monday, dropping to a ten-day low against the Japanese yen and weakening against other major currencies.
The decline follows a surprise downgrade of the U.S. government’s credit rating by Moody’s, coupled with ongoing trade tensions that have soured investor sentiment. The greenback’s stumble reflects growing unease about the United States’ fiscal health and its position in an increasingly volatile global trade environment.
Moody’s, one of the world’s leading credit rating agencies, announced late Friday that it had downgraded the U.S. sovereign credit rating from Aaa to Aa1, citing the nation’s ballooning $36 trillion debt pile and rising interest costs as key concerns.
This move marks the final major ratings agency to strip the U.S. of its coveted triple-A status, following earlier downgrades by Fitch Ratings and S&P Global Ratings.
The downgrade has raised questions about the U.S.’s long-standing role as the world’s ultimate safe-haven asset provider, with analysts warning that it could lead to higher borrowing costs and further pressure on the dollar.
The greenback fell as much as 0.7% against the yen, hitting 144.665, its lowest level since May 8, as investors flocked to safe-haven currencies like the yen and Swiss franc.
The dollar also weakened 0.45% against the Swiss franc to 0.83355, while the euro climbed 0.73% to $1.1247, reflecting a broader shift away from U.S. assets. “The focus on U.S. growth risks and the administration’s policy agenda may have put the U.S. safe-haven status in question,” said Mahjabeen Zaman, head of foreign exchange research at ANZ.
The timing of the downgrade is particularly challenging for the U.S. administration, which is grappling with budget negotiations in Congress ahead of an early July deadline.
Market reactions were mixed but underscored the uncertainty. U.S. stock futures slipped, and Treasury yields ticked higher as investors reassessed the risk profile of U.S. assets.
WHAT YOU SHOULD KNOW
As markets digest these developments, attention is turning to upcoming U.S. economic data, including the Consumer Price Index and retail sales figures, which could provide clues about the Federal Reserve’s next moves.
ALSO READ TOP STORIES FROM VERILY NEWS
