By Lucy Raitano and Gertrude Chavez-Dreyfuss
LONDON/NEW YORK (Reuters) -The U.S. dollar weakened broadly on Monday, hitting a more than one-week low against the safe-haven yen, Swiss franc and euro as markets digested a surprise downgrade of the U.S. government’s credit rating, while trade tensions also weighed.
U.S. Treasury Secretary Scott Bessent said in television interviews on Sunday that President Donald Trump will impose tariffs at the rate he threatened last month on trading partners that do not negotiate in “good faith”.
But Moody’s action to cut the United States’ top sovereign credit rating by one notch on Friday started the ball rolling downward for the dollar. Moody’s cited concerns about the U.S. government’s growing $36 trillion debt pile.
The move followed similar actions by Fitch in the summer of 2023, and S&P’s downgrade in 2011.
The news saw the dollar lose ground against its major rivals following four straight winning weeks when it was boosted by rising optimism for U.S. trade deals and a thaw in relations with China that eased fears of a global recession.
“Credit ratings matter and the fact that the U.S. sees itself downgraded so early into the year is indicative of how negative analysts and economists feel the impact of this new approach to trade will be,” said Juan Perez, director of trading at Monex USA in Washington.
“The overall financial environment remains cautious, perplexed and on a trend of ‘Sell America’ which this development on credit could further exacerbate, reflecting poorly on the dollar value going forward.”
The greenback fell to 144.665 yen, its lowest since May 8 on Monday, and was last down 0.4% at 145.07. It also fell to its weakest level in more than a week at 0.8317 Swiss francs.
The euro, meanwhile, rose 0.7% to $1.1248, after earlier rising to its highest since May 9.
Sterling also gained versus the dollar, adding 0.6% to $1.3363. Earlier in the session the pound climbed to its highest since April 30 as Britain agreed the most significant reset of defense and trade ties with the European Union since Brexit on Monday.
Despite the dollar’s losses on Monday, New York Federal Reserve President John Williams said that he has seen no large-scale move away from U.S. assets, and noted that the greenback remains the world’s reserve currency.
China on Monday meanwhile called on the U.S. to take responsible policy measures to maintain the stability of the international financial and economic system and safeguard the interests of investors.
That followed Bessent’s stern warning on Sunday to countries not negotiating in good faith with the U.S. on trade.
However, a Financial Times report that the U.S. had begun serious trade talks with the EU brightened the mood a bit. Those talks broke a long deadlock, offering 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 U.S. economy is going to weather this is very much open to question.”
Elsewhere, Trump cleared a hurdle towards passing a sweeping tax cut bill that would add an estimated $3 trillion to $5 trillion to the nation’s debt over the next decade, after winning approval from a key congressional committee.
“The focus on U.S. growth risks and the U.S. 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.
Australia’s dollar was up 0.66% at US$0.6444 following three days of declines ahead of Tuesday’s Reserve Bank of Australia policy announcement, with a quarter-point cut widely expected.
The New Zealand dollar also rose, up 0.5% at US$0.5911.
Currency
bid
prices at
19 May
02:08
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 100.37 100.76 -0.39% -7.48% 100.89 100.
index 06
Euro/Doll 1.1243 1.1167 0.69% 8.6% $1.1288 $1.1
ar 17
Dollar/Ye 145.12 145.6 -0.29% -7.74% 145.415 144.
n 695
Euro/Yen 163.19 162.55 0.39% -0.02% 163.38 162.
15
Dollar/Sw 0.8338 0.8373 -0.41% -8.11% 0.8366 0.83
iss 17
Sterling/ 1.3363 1.328 0.61% 6.83% $1.3403 $1.3
Dollar 278
Dollar/Ca 1.3943 1.397 -0.14% -2.99% 1.398 1.39
nadian 37
Aussie/Do 0.6447 0.6404 0.69% 4.21% $0.6451 $0.6
llar 4
Euro/Swis 0.9376 0.9346 0.32% -0.18% 0.9397 0.93
s 36
Euro/Ster 0.8413 0.8406 0.08% 1.69% 0.8426 0.84
ling 04
NZ 0.5914 0.588 0.58% 5.68% $0.5918 0.58
Dollar/Do 73
llar
Dollar/No 10.3134 10.3628 -0.48% -9.26% 10.4 10.2
rway 854
Euro/Norw 11.5961 11.5833 0.11% -1.47% 11.644 11.5
ay 88
Dollar/Sw 9.6996 9.7555 -0.57% -11.96% 9.7821 9.66
eden 89
Euro/Swed 10.9068 10.8998 0.06% -4.88% 10.9526 10.8
en 919
(Reporting by Lucy Raitano in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Rocky Swift and Kevin Buckland in Tokyo; Editing by Stephen Coates, Edwina Gibbs and Jan Harvey)
