Dollar slips again on caution over US economy, Aussie falls after RBA
20 May 2025 14:35
TOKYO (Reuters)The dollar slipped on Tuesday after declining for a week, weighed down by the Federal Reserve's caution over the economy and as US lawmakers came closer to passing a bill expected to widen the nation's fiscal deficit.The greenback sold off broadly on Monday following last week's downgrade of the US sovereign rating by Moody's on deficit concerns. Now attention turns to a critical vote in Washington over US President Donald Trump's sweeping tax cuts.Dollar selling continued on Tuesday, leaving the US currency down 0.35% against the yen at 144.305 hitting a fresh 12-day low. The euro rose 0.14% to $1.1259, and the Swiss franc strengthened, pushing the dollar down 0.2% to 0.83280 francs.Bucking the trend was the Australian dollar which edged lower after the Reserve Bank of Australia's cut benchmark interest rates by 25 basis points and left the door open to further easing in the months ahead. It was last down 0.59% to $0.64195, trimming a 0.8% gain on Monday.Trump is expected to join the congressional debate over his tax bill on Tuesday. The vote comes after Moody's stripped the US government of its top-tier credit rating, citing concerns over the nation's growing $36.2 trillion debt pile.Trump's bill would add $3 trillion to $5 trillion to the debt, according to nonpartisan analysts. Ballooning fiscal debt, trade frictions, and weakened confidence have weighed on US assets. The US dollar index has tumbled as much as 10.6% from its January highs, one of the sharpest retreats for a three-month period.The dollar got a breather after Trump paused many of the largest tariffs he announced last month. But comments from Japan's top trade envoy on Tuesday that Tokyo was firm in its anti-tariff stance pointed to no easy off-ramp in the negotiations in the weeks and months ahead.And in the wake of Trump's tariff turmoil, Britain on Monday agreed to the most significant reset of defence and trade ties with the European Union since Brexit.The pound was last up 0.16% at 1.33840 having risen 0.6% on Monday.
"Optimism surrounding key UK economic data and a major political breakthrough has fuelled sterling's gains alongside broad-based dollar weakness," wrote George Vessey, lead FX and macro strategist at Convera.
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