US Dollar Extends Losses Amid Tax Bill Snag, Moody's Downgrade, G7 Talks

The US Dollar Index has declined for a third consecutive day, reaching a two-week low near 99.7, amid mounting concerns over US fiscal stability, political uncertainty, and geopolitical tensions in the Middle East. The dollar's weakness has been exacerbated by President Trump's inability to secure support for his major tax bill, which is projected to significantly increase the national debt, leading to Moody’s downgrade of the US sovereign credit rating. Additionally, ongoing trade tensions and uncertainty ahead of the G7 finance ministers meeting have added pressure to the greenback. Safe haven flows have supported the yen, with USD/JPY extending its decline as markets react to reports of a possible Israeli strike on Iran and the prospect of US-Japan currency talks during the G7 summit. Federal Reserve officials have also expressed concerns about the impact of administration policies on the economy, warning of weakening labor markets and the risk of stagflation. Traders are closely watching the upcoming bilateral meeting between US Treasury Secretary Scott Bessent and Japan’s Finance Minister Katsunobu Kato for further developments.