Dollar Downturn Amid Credit Downgrade and Trade Tensions

The U.S. dollar saw a decrease in value in early Asian trade as the market reacted to a surprise downgrade of the U.S. government's credit rating. This development, coupled with ongoing trade frictions, has dampened investor sentiment.

Last week, the dollar advanced 0.6% against major currencies after a temporary trade truce between the U.S. and China. However, new economic data indicate rising import prices and declining consumer confidence. Moody's has downgraded the U.S. credit rating, citing concerns over the growing $36 trillion national debt.

U.S. Treasury Secretary Scott Bessent has confirmed that tariffs threatened by President Trump would proceed if trading partners do not negotiate in good faith. Meanwhile, Trump's proposed tax cut bill faces resistance from within his party, likely adding $3-5 trillion to national debt over the next decade. This uncertainty has affected the dollar's value against the yen and the Swiss franc, while the Australian dollar observed a slight uptick.

(With inputs from agencies.)