Dollar Decline: Fiscal Concerns and Fed Policies Fuel Investor Anxiety

The U.S. dollar experienced a significant drop on Tuesday, particularly against the Japanese yen and Swiss franc, as fiscal concerns emerged following President Trump's expansive tax-cut and spending bill. Investors are anticipating a more rapid easing of monetary policy by the Federal Reserve this year, ahead of crucial U.S. economic data releases.

This anticipation has led to a sell-off of the dollar, which declined by 0.33% to a 10-year low, trading at 0.790 Swiss francs, and fell 0.64% to 143.08 Japanese yen. The yen capped the year's first half with a substantial 9% gain, marking its strongest performance since 2016. The euro reached a near four-year high at $1.1781, with a 13.8% surge in the first half of the year, according to LSEG data.

Market sentiment regarding the U.S. dollar remains cautious due to erratic trade policies and fiscal uncertainties. Additionally, Trump's continuous pressure on the Federal Reserve to reduce interest rates has exacerbated concerns over the central bank's independence. Investors are closely monitoring labor market data, which could influence further rate cut bets and impact the dollar's performance.

(With inputs from agencies.)