The US Dollar Index (DXY) extended its decline for a third consecutive session, slipping to around 99.70 during Wednesday’s Asian trading hours. The Greenback came under renewed pressure as cautious commentary from Federal Reserve officials and mounting fiscal concerns dampened investor sentiment.
San Francisco Fed President Mary C. Daly and Cleveland Fed President Beth Hammack expressed growing unease over the trajectory of the U.S. economy. Despite resilient headline data, both officials cited weakening business and consumer confidence, partly blaming uncertainty stemming from U.S. trade policy. Their comments underscore a shift in sentiment, even as the central bank maintains its current monetary stance.
While markets have speculated on potential policy easing, no Fed official has signaled an imminent move. On Monday, Atlanta Fed President Raphael Bostic forecast a single rate cut in 2025. He further cautioned that the volatile tariff landscape—shaped largely by the Trump administration—could destabilize trade logistics and hinder the import-heavy structure of the U.S. economy.
The dollar’s struggles have been exacerbated by Moody’s recent downgrade of the U.S. sovereign credit rating from ‘Aaa’ to ‘Aa1.’ The rating agency cited structural fiscal weaknesses, echoing earlier downgrades by Fitch in 2023 and Standard & Poor’s in 2011. Moody’s also projected a troubling rise in U.S. federal debt, expecting it to reach 134% of GDP by 2035, up sharply from 98% in 2023. The federal budget deficit, currently near 9% of GDP, is projected to widen further due to surging debt-servicing costs, expanding entitlement obligations, and softening tax revenues.
Taken together, the Fed’s cautious tone, heightened fiscal risk, and deteriorating investor confidence are placing sustained downward pressure on the U.S. dollar.
