Dollar slips after US credit downgrade, Aussie edges higher before RBA
TOKYO : The US dollar dipped to a one-week low versus the safe-haven yen today as markets digested a surprise downgrade of the US government's credit rating and as trade friction concerns weighed on sentiment.
Australia's dollar turned higher following three days of declines ahead of tomorrow's Reserve Bank of Australia (RBA) policy announcement, with a quarter-point cut widely expected.
Moody's cut the US's top sovereign credit rating by one notch on Friday, the last of the major ratings agencies to downgrade the country, citing concerns about its growing US$36 trillion debt pile.
The news saw the dollar turn lower against its major rivals following four straight winning weeks when it was boosted by rising optimism for US trade deals and then a thaw in relations with China that eased fears of a global recession.
The greenback slipped as much as 0.6% to ¥144.80 for the first time since May 9 on Monday, while the euro gained as much as 0.3% to US$1.1199.
'While the decision itself is seen as a catch-up to S&P's move on Aug 5 2011 and Fitch's announcement to do the same on Aug 1 2023, Moody's decision could still feed US dollar bears,' said Paul Mackel, global head of FX research at HSBC.
'Given this rating erosion has been slow moving, the simple takeaway is Moody's step should not matter for the US dollar. However, one needs to be careful with this assumption,' Mackel said.
US treasury secretary Scott Bessent said in television interviews yesterday that President Donald Trump will impose tariffs at the rate he threatened last month on trading partners that do not negotiate in 'good faith'.
However, a Financial Times report that the US had begun serious trade talks with the EU, breaking a long deadlock, offered some hope for additional deals after Washington inked a framework agreement with Britain earlier this month.
Trump has previously said he has potential deals with India, Japan and South Korea as well, although talks with Tokyo seem to be stumbling over car tariffs.
In the market, 'there's a lot of complacency about the ability to pull off deals,' said Ray Attrill, head of FX strategy at National Australia Bank.
'Confidence that the US economy is going to weather this is very much open to question,' Attrill said.
Trump cleared a hurdle towards passing a sweeping tax cut bill that would add an estimated US$3 trillion to US$5 trillion to the nation's debt over the next decade, after winning approval from a key congressional committee.
The dollar declined 0.2% to CHF0.8358, another safe-haven currency. Sterling added 0.1% to US$1.3297.
'The focus on US growth risks and the US administration's policy agenda may have put the US safe-haven status in question,' said Mahjabeen Zaman, head of foreign exchange research at ANZ.
The Australian dollar edged up 0.1% to US$0.6413 after sliding more than 1% over the prior three sessions.
Markets have priced in a certainty of a quarter-point cut to the RBA's 4.10% cash rate tomorrow, as slowing inflation allows policymakers to respond to rising global risks.
The central bank's guidance will be key, as investors have reduced their expectations for rapid-fire rate cuts in the coming months following the Sino-US tariff truce and robust Australian employment data.
New Zealand's kiwi dollar rose 0.2% to US$0.5890.
Bitcoin briefly jumped as much as 2.8% to reach US$107,060.46 for the first time since January, the same month that the token notched its all-time peak of US$109,071.86.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Malay Mail
an hour ago
- Malay Mail
Electricity tariffs to be reviewed monthly under new fuel adjustment system, says Fadillah
KUALA LUMPUR, July 29 — The Automatic Fuel Adjustment (AFA), the new adjustment mechanism for electricity tariffs in Peninsular Malaysia, is aimed at ensuring tariff reviews are more transparent and in line with the global fuel market reality, according to Deputy Prime Minister Datuk Seri Fadillah Yusof. Fadillah, who is also the energy transition and water transformation minister, said that through this new mechanism, electricity tariffs will be adjusted monthly compared to only every six months under the Imbalance Cost Pass-Through (ICPT) system. 'For domestic users consuming below 600 kilowatt-hours (kWh) per month, they are exempted from the AFA, while those consuming more than 600 kWh will be charged for the energy resources, whether gas or coal. 'For August, due to the drop in fuel costs from Aug 1 to 31, a rebate of 1.545 sen per kWh will be given for the power supply. (The review) is done monthly -- no longer every six months -- which means it is more accurate and transparent based on real-time,' he said during the Minister's Question Time session in the Dewan Rakyat today. He was responding to a supplementary question from Datuk Abdul Khalib Abdullah (PN-Rompin) who asked whether the government plans to consider a more flexible and transparent tariff review in the future. Fadillah said the latest tariff review also involves a change in approach from customer categorisation based on economic sectors to by voltage usage. Therefore, he said, the government encourages those who consume higher amounts of energy to switch to renewable energy, including through solar photovoltaic installation, aimed at helping them save costs and reduce overall energy consumption. Answering Dr Mohammed Taufiq Johari's (PH-Sungai Petani) query regarding the objectives of the new electricity tariff schedule in achieving the energy transition agenda and long-term sustainability, Fadillah said it is an improvement to the previous structure based on four main principles. These include transparent tariff setting, tariff structure that reflects actual supply costs, fair and equitable cost distribution to all consumers, and minimal impact on domestic users in terms of bill variance. 'This new structure includes energy charges, capacity charges, network charges, and retail charges for each user category compared to the old structure which only had energy charge and minimum charge components. 'In this regard, the new structure is more transparent and exposes users to the costs that must be paid to obtain electricity supply,' he said. On June 20, the Ministry of Energy Transition and Water Transformation, through the Energy Commission, announced a revised electricity tariff schedule for Peninsular Malaysia effective from July 1, 2025. — Bernama
Malay Mail
an hour ago
- Malay Mail
Household debt at 84.3pc of GDP, but Malaysians still have a strong buffer, says Finance Ministry
KUALA LUMPUR, July 29 — Malaysia's household debt stood at RM1.65 trillion as of the end of March 2025, equivalent to 84.3 per cent of the nation's gross domestic product (GDP). However, Deputy Finance Minister Lim Hui Ying highlighted that the value of household financial assets exceeds the total debt, indicating that the public's overall financial position remains strong. 'Household debt should be viewed alongside household financial assets, which are significantly larger. 'On aggregate, household financial assets continue to exceed debt by 2.1 times, providing a solid buffer for households,' she told the Dewan Rakyat today. Lim was responding to a supplementary question from Datuk Awang Hashim (PN-Pendang), who inquired about the debt-to-GDP ratio. She said that regarding household debt, the government and Bank Negara Malaysia are always committed to assisting credit users who face financial difficulties. In response to the original question posed by Datuk Mohd Shahar Abdullah (BN-Paya Besar), who asked whether the government has regulatory plans for credit services to ensure stronger consumer protection, Lim said that loans approved by financial institutions are subject to the Policy Document on Responsible Financing. This document was issued by Bank Negara Malaysia (BNM) and has been in effect since 2012. Lim explained that through the implementation of this policy document, the debt service ratio (DSR) for households remains within prudent levels, with the median DSR for outstanding loans at 34 per cent, while the median DSR for newly approved loans is 41 per cent in 2024. 'The DSR maintained within these prudent levels serves as an adequate buffer for households to meet their debt obligations,' she said. Meanwhile, Lim said that the Credit Counselling and Management Agency (AKPK) also provides advisory services and assistance in financial management and loan restructuring. The deputy minister added that AKPK has successfully helped more than 64,000 borrowers fully settle their loans through its Debt Management Programme, while nearly 270,000 participants remain actively engaged in their financial recovery journeys under this programme. — Bernama
Malay Mail
an hour ago
- Malay Mail
Love all things — whether plush toys or clothes — Japanese? These thrift stores in the Klang Valley are cheaper than a plane ticket to Japan
KUALA LUMPUR, July 29 — So what's all the fuss about Mono Loop, you're asking... isn't it just another second-hand shop for collectors and hobbyists? Aina Shahida, 26, who was seen at the recently-opened outlet — its first in Malaysia — disagrees. 'I came here with my friend, I wasn't even looking for anything but I found limited edition Disneyland Tokyo pins — I love Disney anything — and I know I can't afford to hop on the plane to Japan anytime soon so this was a very satisfying find. 'I also saw limited edition Miffy merchandise too, it's rare and we don't actually have a wide Miffy presence here in Malaysia,' she said as she was contemplating whether to buy herself a set of Miffy face towels. 'It's the feeling of exclusivity, being the only one who has an item that no one else has makes it special.' This same feeling hit Aliya Nadirah, a 35-year-old marketing manager who loves analogue cameras, who found multiple lanes of second-hand cameras at Mono Loop. 'It's the perfect place for hobbyists who have been hunting for certain items. I've never seen so many rows of vinyl records, digital and analogue cameras, watches and figurines,' she said. Rows of vinyl records, perfect for collectors. — Picture by Raymond Manuel Not just a bargain, but a treasure hunt That thrill — the sense of uncovering a hidden treasure — is what continues to pull Malaysians back into thrift stores like Mono Loop, branch supervisor Shahid Othman said. 'You know the term dive? Diving in to look for treasures, you never know what you'll find. 'That's the exciting feeling about shopping at a shop like this, the discovery is endless,' Shahid said. Shahid explained the founders behind Mono Loop Japan saw potential for growth in Malaysia, seeing that there is a community that appreciates these items. 'What we noticed is that, among Malaysians there is still a big interest in hobby goods, so Mono Loop fits right in. 'It's a collector's treasure cove if you ask me because there are items that you can only get if you visit Japan because Japan doesn't export everything. 'Our goods — some pre-loved and some off-season — come directly from Japan, so instead of going there, it's now here in Malaysia,' he added. Among the many items that are available in Mono Loop there are figurines, watches, cameras, vinyl records, plushies, limited edition merchandise and much more. 'Before Mono Loop came, there was Jalan Jalan Japan and 2nd Street, but we're slightly different as we don't have apparel. 'Our focus is on hobby-related items,' Shahid added. Prices start from as low as RM1. Almost a department store straight from Japan. — Picture by Raymond Manuel Neverending possibilities For Lenora Lee, as a fan of Japanese fashion — clothes, bags and shoes — she hunts for clothing items at Jalan Jalan Japan. 'When I went to the one in Seremban, there were rows and rows of clothes, shoes and bags. 'I'm glad that they've opened many more outlets here in the Klang Valley. Each time I step into the store, I'm amazed at how there is always something 'new' on the display,' she said. Lee said it is the perfect retail therapy for her since she's still a student and can only spend a minimal sum on clothing. Various items from Japan can be found in Jalan Jalan Japan — even kimono cloth! — Picture by Raymond Manuel Another one of Lee's favourite haunt is 2nd Street — a thrift store chain known for buying and selling pre-loved clothing and goods owned by GEO Holdings Corporation, a listed company on the Tokyo Stock Exchange. 'My friend brought me to the store in Bandar Utama, and I've been hooked on 2nd Street since. 'What's different about 2nd Street is that you don't have to rummage through endless piles of clothing because they are displayed according to size, type and even colours,' Lee said. This same feeling hit Aliya Nadirah, a 35-year-old marketing manager who loves analogue cameras found multiple lanes of second-hand machines at Mono Loop. 'It's the perfect place for hobbyists who have been hunting. I've never seen so many rows of vinyl records, digital and analogue cameras, watches and figurines,' she said.
