US dollar skids on concerns about implications of Trump tax bill
LONDON/NEW YORK :The U.S. dollar fell for a third day against a range of currencies on Wednesday, as investors worried about the Trump administration's tax cut and spending bill, with Republicans still divided over the details of the legislation.
U.S. President Donald Trump met with House Republicans on Tuesday and failed to convince his party's holdouts to back his sweeping tax bill. Republican hardliners continue to argue the bill does not sufficiently cut spending, according to House Speaker Mike Johnson.
Amid the bill impasse, the euro rose 0.5 per cent against the dollar to $1.1339, after earlier climbing to a two-week high.
"There's a general reallocation away from U.S. safe-haven assets, ex-equities, partly due to the budget bill," said Eugene Epstein, head of trading and structured products, North America, at Moneycorp in New Jersey. "Even before the bill, we already had an acceleratingly poor debt to GDP ratio. Our spending has outpaced growth."
Trump's tax bill would add $3 trillion to $5 trillion to the country's debt, according to nonpartisan analysts.
Traders were also wary of U.S. officials potentially angling for a weaker dollar as part of independent trade deals on the sidelines of Group of Seven finance minister meetings 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 to the end of a 90-day tariff respite for U.S. trade partners in the absence of new 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.
All this has combined to keep the dollar under pressure and U.S. Treasury yields rising, as the "sell America" theme continues to inform investment decisions, if in a less dramatic fashion than earlier this month.
The yen strengthened against the dollar, which fell 0.6 per cent to 143.64 yen, extending gains derived in part from a steep rise this week in domestic bond yields.
Yields on 30-year Japanese government bonds surged to new records on Wednesday in the wake of a poor auction result that raised doubts over coming debt sales in the weeks ahead. Super-long yields have been on the rise, following U.S. Treasury yields higher and as concerns swirled about new fiscal stimulus ahead of a Japanese upper house election slated for July.
An auction of 20-year U.S. Treasuries later on Wednesday might offer a litmus test of investor appetite for long-dated U.S. debt.
"Higher Japanese yields narrow the gap with U.S. Treasuries, reducing the incentive to hold the dollar," wrote Forex.com analyst Fawad Razaqzada in emailed comments.
"With Japanese 10-year bonds climbing and U.S. yields holding steady, the tide may be turning for dollar/yen. The currency pair which found short-lived relief around 140.00, looks vulnerable again."
The yen, along with safe-havens like the Swiss franc and gold, also got a lift after CNN on Tuesday reported that new intelligence gathered by the United States suggests Israel is making preparations to strike Iranian nuclear facilities.
A Moody's downgrade of the U.S. sovereign debt rating on Friday, meanwhile, may have had only a limited impact on markets, but it has added to the narrative of less faith in U.S. assets as safe havens. As a result, the dollar was down on the year against every major currency.
Market participants also looked ahead to U.S.-Japan talks, with Japanese Finance Minister Katsunobu Kato later this week.
Kato said ahead of an expected meeting with U.S. Treasury Secretary Scott Bessent that talks on exchange rates would be based on their shared view that excessive volatility is undesirable.
In other currencies, the pound hit its highest since February 2022 after data showed UK consumer inflation flared hotter in April than most economists expected, thereby clipping some of the Bank of England's scope to cut rates quickly.
Sterling was last up 0.4 per cent at $1.3443.
Currency
bid
prices at
21 May
03:55
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 99.511 99.963 -0.44 per cent -8.28 per cent 99.971 99.3
index 95
Euro/Doll 1.1337 1.1286 0.46 per cent 9.51 per cent $1.1362 $1.1
ar 281
Dollar/Ye 143.67 144.575 -0.6 per cent -8.67 per cent 144.415 143.
n 465
Euro/Yen 162.89 163.03 -0.09 per cent -0.2 per cent 163.3 162.
67
Dollar/Sw 0.8254 0.8284 -0.36 per cent -9.05 per cent 0.8284 0.82
iss 1
Sterling/ 1.3439 1.3391 0.37 per cent 7.47 per cent $1.3468 $1.3
Dollar 387
Dollar/Ca 1.3824 1.3915 -0.64 per cent -3.86 per cent 1.3912 1.38
nadian 25
Aussie/Do 0.6464 0.6424 0.65 per cent 4.49 per cent $0.6466 $0.6
llar 419
Euro/Swis 0.9357 0.9344 0.14 per cent -0.38 per cent 0.9361 0.93
s 15
Euro/Ster 0.8433 0.8423 0.13 per cent 1.95 per cent 0.8459 0.84
ling 23
NZ 0.5962 0.5926 0.62 per cent 6.57 per cent $0.5964 0.59
Dollar/Do 22
llar
Dollar/No 10.1279 10.2465 -1.16 per cent -10.85 per cent 10.2578 10.1
rway 268
Euro/Norw 11.4872 11.5624 -0.65 per cent -2.39 per cent 11.605 11.4
ay 68
Dollar/Sw 9.5539 9.6301 -0.79 per cent -13.28 per cent 9.6441 9.54
eden 33
Euro/Swed 10.8313 10.8669 -0.33 per cent -5.54 per cent 10.8865 10.8
en 28
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
42 minutes ago
- Straits Times
Trump gets key wins at Supreme Court on immigration, despite some misgivings
The US Supreme Court most recently let the Trump administration end temporary legal status provided to migrants for humanitarian reasons. PHOTO: REUTERS Trump gets key wins at Supreme Court on immigration, despite some misgivings The US Supreme Court swept away this week another obstacle to one of President Donald Trump's most aggressively pursued policies – mass deportation – again showing its willingness to back his hardline approach to immigration. The justices, though, have signalled some reservations with how he is carrying it out. Since Mr Trump returned to the White House in January, the court already has been called upon to intervene on an emergency basis in seven legal fights over his crackdown on immigration. It most recently let Mr Trump's administration end temporary legal status provided to hundreds of thousands of migrants for humanitarian reasons by his Democratic predecessor Joe Biden while legal challenges in two cases play out in lower courts. The Supreme Court on May 30 lifted a judge's order that had halted the revocation of immigration 'parole' for more than 500,000 Venezuelan, Cuban, Haitian and Nicaraguan migrants. On May 19, it lifted another judge's order preventing the termination of 'temporary protected status' for more than 300,000 Venezuelan migrants. In some other cases, however, the justices have ruled that the administration must treat migrants fairly, as required under the US Constitution's guarantee of due process. 'This president has been more aggressive than any in modern US history to quickly remove non-citizens from the country,' said Dr Kevin Johnson, an immigration and public interest law expert at the University of California, Davis. No president in modern history 'has been as willing to deport non-citizens without due process,' he added. That dynamic has forced the Supreme Court to police the contours of the administration's actions, if less so the legality of Mr Trump's underlying policies. The court's 6-3 conservative majority includes three justices appointed by Mr Trump during his first term as president. 'President Trump is acting within his lawful authority to deport illegal aliens and protect the American people. While the Supreme Court has rightfully acknowledged the president's authority in some cases, in others they have invented new due process rights for illegal aliens that will make America less safe. We are confident in the legality of our actions and will continue fighting to keep President Trump's promises,' White House spokesperson Abigail Jackson told Reuters. The justices twice – on April 7 and on May 16 – have placed limits on the administration's attempt to implement Mr Trump's invocation of a 1798 law called the Alien Enemies Act, which historically has been employed only in wartime, to swiftly deport Venezuelan migrants who it has accused of being members of the Tren de Aragua gang. Lawyers and family members of some of the migrants have disputed the gang membership allegation. On May 16, the justices also said a bid by the administration to deport migrants from a detention centre in Texas failed basic constitutional requirements. Giving migrants 'notice roughly 24 hours before removal, devoid of information about how to exercise due process rights to contest that removal, surely does not pass muster', the court stated. Due process generally requires the government to provide notice and an opportunity for a hearing before taking certain adverse actions. The court has not outright barred the administration from pursuing these deportations under the Alien Enemies Act, as the justices have yet to decide the legality of using the law for this purpose. The US government last invoked the Alien Enemies Act during World War Two to intern and deport people of Japanese, German and Italian descent. 'The Supreme Court has in several cases reaffirmed some basic principles of constitutional law (including that) the due process clause applies to all people on US soil,' said Professor Elora Mukherjee, director of Columbia Law School's immigrants' rights clinic. Even for alleged gang members, she said, the court 'has been extremely clear that they are entitled to notice before they can be summarily deported from the United States'. A wrongly deported man In a separate case, the court on April 10 ordered the administration to facilitate the release from custody in El Salvador of Mr Kilmar Abrego Garcia, a Salvadoran migrant who was living in Maryland. The administration has acknowledged that Mr Abrego Garcia was wrongly deported to El Salvador. The administration has yet to return him to the United States, which according to some critics amounts to defiance of the Supreme Court. The administration deported on March 15 more than 200 people to El Salvador, where they were detained in the country's massive anti-terrorism prison under a deal in which the United States is paying President Nayib Bukele's government US$6 million ($7.74 million). Dr Ilya Somin, a constitutional law professor at George Mason University, said the Supreme Court overall has tried to curb the administration's 'more extreme and most blatantly illegal policies' without abandoning its traditional deference to presidential authority on immigration issues. 'I think they have made a solid effort to strike a balance,' said Dr Somin, referring to the Alien Enemies Act and Abrego Garcia cases. 'But I still think there is excessive deference, and a tolerance for things that would not be permitted outside the immigration field.' That deference was on display over the past two weeks with the court's decisions letting Mr Trump terminate the grants of temporary protected status and humanitarian parole previously given to migrants. Such consequential orders were issued without the court offering any reasoning, Prof Mukherjee noted. 'Collectively, those two decisions strip immigration status and legal protections in the United States from more than 800,000 people. And the decisions are devastating for the lives of those who are affected,' she said. 'Those individuals could be subject to deportations, family separation, losing their jobs, and if they're deported, possibly even losing their lives.' Travel ban ruling Mr Trump also pursued restrictive immigration policies in his first term as president, from 2017 to 2021. The Supreme Court gave Mr Trump a major victory in 2018, upholding his travel ban targeting people from several Muslim-majority countries. In 2020, the court blocked Mr Trump's bid to end a programme that protects from deportation hundreds of thousands of migrants – often called 'Dreamers' – who entered the United States illegally as children. Other major immigration-related cases are currently pending before the justices, including Mr Trump's effort to broadly enforce his January executive order to restrict birthright citizenship – a directive at odds with the longstanding interpretation of the Constitution as conferring citizenship on virtually every baby born on US soil. The court heard arguments in that case on May 15 and has not yet rendered a decision. Another case concerns the administration's efforts to increase the practice of deporting migrants to countries other than their own, including to places such as war-torn South Sudan. Boston-based US District Judge Brian Murphy required that migrants destined for so-called 'third countries' be notified and given a meaningful chance to seek legal relief by showing the harms they may face by being sent there. The judge on May 21 ruled that the administration had violated his court order by attempting to deport migrants to South Sudan. They are now being held at a military base in Djibouti. The administration on May 27 asked the justices to lift Judge Murphy's order because it said the third-country process is needed to remove migrants who commit crimes because their countries of origin are often unwilling to take them back. Dr Johnson predicted that the Supreme Court will side with the migrants in this dispute. 'I think that the court will enforce the due process rights of a non-citizen before removal to a third country,' he said. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
CNA
43 minutes ago
- CNA
South Korea's Lee, Trump agree to work towards swift tariff deal, Lee's office says
SEOUL/WASHINGTON: US President Donald Trump and South Korea's new president Lee Jae-myung agreed to work toward a swift tariff deal in their first phone call since Lee was elected this week, Lee's office said on Friday (Jun 6). Trump has imposed tariffs on South Korea, a long time ally with which it has a bilateral free trade deal, and pressed it to pay more for the 28,500 US troops stationed there. Separately, Trump allies have aired concerns about Lee's more conciliatory stance towards China, Washington's main geopolitical rival. Lee, a liberal, was elected on Jun 3 after former conservative leader, Yoon Suk Yeol, was impeached and ousted. The future of South Korea's export-oriented economy may hinge on what kind of deal Lee can strike with Trump, with all of his country's key sectors from chips to autos and shipbuilding heavily exposed to global trade. His term began on Wednesday. "The two presidents agreed to make an effort to reach a satisfactory agreement on tariff consultations as soon as possible that both countries can be satisfied with," Lee's office said in a statement. "To this end, they decided to encourage working-level negotiations to yield tangible results." Trump invited Lee to a summit in the US and they plan to meet soon, according to a White House official. Analysts say the first opportunity for the two to meet could be at a G7 summit in Canada in mid-June. Lee's office said the two leaders also discussed the assassination attempts they both experienced last year as well as their enthusiasm for golf. Lee underwent surgery after he was stabbed in the neck by a man in January last year, while Trump was wounded in the ear by a bullet fired by a would-be assassin in July. South Korea, a major US ally and one of the first countries after Japan to engage with Washington on trade talks, agreed in late April to craft a "July package" scrapping levies before the 90-day pause on Trump's reciprocal tariffs is lifted, but progress was disrupted by the change of governments in Seoul. Lee said on the eve of the elections that "the most pressing matter is trade negotiations with the United States." Lee's camp has said, however, that they intend to seek more time to negotiate on trade with Trump. While reiterating the importance of the US-South Korea alliance, Lee has also expressed more conciliatory plans for ties with China and North Korea, singling out the importance of China as a major trading partner while indicating a reluctance to take a firm stance on security tensions in the Taiwan Strait. Political analysts say that while Trump and Lee may share a desire to try to re-engage with North Korea, Lee's stance on China could cause friction with the US. A White House official said this week that South Korea's election was fair, but expressed concern about Chinese interference in what analysts said may have been a cautionary message to Lee. Speaking in Singapore last week, US Defense Secretary Pete Hegseth said many countries were tempted by the idea of seeking economic cooperation with China and defense cooperation with the United States, and warned that such entanglement complicated defense cooperation.
CNA
3 hours ago
- CNA
US, China to hold trade talks on June 9 in London, Trump says
US President Trump on Friday (Jun 6) said three of his cabinet officials will meet with representatives of China in London on Jun 9 to discuss a trade deal. In a post on his Truth Social platform, Trump said Treasury Scott Bessent, Secretary of Commerce Howard Lutnick, and United States Trade Representative Jamieson Greer will attend from the US side. "The meeting should go very well," Trump wrote. The scheduling of the meeting comes a day after Trump spoke to Chinese President Xi Jinping in a rare leader-to-leader call amid weeks of brewing trade tensions and a battle over critical minerals. The countries struck a 90-day deal on May 12 to roll back some of the triple-digit, tit-for-tat tariffs they had placed on each other since Trump's January inauguration. Though stocks rallied, the temporary deal did not address broader concerns that strain the bilateral relationship, from the illicit fentanyl trade to the status of democratically governed Taiwan and US complaints about China's state-dominated, export-driven economic model.
