Dollar's Downfall: Trump, Trade, and Fed Easing Trigger Fiscal Jitters

The U.S. dollar fell to its weakest level against the euro since September 2021, sparked by fiscal concerns regarding President Donald Trump's spending bill and uncertainties in trade agreements. Investors are now betting on a faster pace of monetary policy easing by the Federal Reserve this year, ahead of a slew of U.S. economic data expected this week, highlighted by Thursday's nonfarm payrolls report.

This led to significant dollar-selling, with the euro reaching a near four-year high and the yen strengthening. The dollar index dropped to its lowest since February 2022, with structural issues such as erratic trade policies contributing to its decline, said Moh Siong Sim, a currency strategist at the Bank of Singapore.

Additionally, concerns over Trump's tax-cut and spending bill, which could add $3.3 trillion to the national debt, have dampened investor sentiment. Trump's continued calls for the Federal Reserve to reduce interest rates further fuel worries about central bank independence, as investors await comments from Fed Chair Jerome Powell at an upcoming European Central Bank forum.

(With inputs from agencies.)