NEW YORK: The US dollar fell for a third day against a range of currencies on Wednesday, as investors worried about the Trump administration’s tax cut and spending bill, with Republicans still divided over the details of the legislation.
US President Donald Trump met with House Republicans on Tuesday and failed to convince his party’s holdouts to back his sweeping tax bill.
Republican hardliners continue to argue the bill does not sufficiently cut spending, according to House Speaker Mike Johnson.
Amid the bill impasse, the euro rose 0.5% against the dollar to $1.1339, after earlier climbing to a two-week high.
Traders were also wary of US officials potentially angling for a weaker dollar as part of independent trade deals on the sidelines of Group of Seven finance minister meetings underway in Canada.
Developments in Trump’s global tariff war, which have swung currencies wildly in recent months, have slowed considerably this week, even as the clock ticks to the end of a 90-day tariff respite for US trade partners in the absence of new deals.
While markets remain optimistic that the White House is eager to get trade flowing again on a sustained basis, talks with close allies, Tokyo and Seoul, appear to have lost momentum.
All this has combined to keep the dollar under pressure and US Treasury yields rising, as the “sell America” theme continues to inform investment decisions, if in a less dramatic fashion than earlier this month.
The yen strengthened against the dollar, which fell 0.6% to 143.64 yen, extending gains derived in part from a steep rise this week in domestic bond yields.
Yields on 30-year Japanese government bonds surged to new records on Wednesday in the wake of a poor auction result that raised doubts over coming debt sales in the weeks ahead. Super-long yields have been on the rise, following US Treasury yields higher and as concerns swirled about new fiscal stimulus ahead of a Japanese upper house election slated for July.
An auction of 20-year US Treasuries later on Wednesday
might offer a litmus test of investor appetite for long-dated US debt.
“Higher Japanese yields narrow the gap with US Treasuries, reducing the incentive to hold the dollar,” wrote Forex.com analyst Fawad Razaqzada in emailed comments.
“With Japanese 10-year bonds climbing and US yields holding steady, the tide may be turning for dollar/yen. The currency pair which found short-lived relief around 140.00, looks vulnerable again.”
The yen, along with safe-havens like the Swiss franc and gold, also got a lift after CNN on Tuesday reported that new intelligence gathered by the United States suggests Israel is making preparations to strike Iranian nuclear facilities.