US Dollar Index Falls Below 100.50 After Moody’s Downgrade of US Credit Rating

US Dollar Index Falls Below 100.50 Following Moody’s Downgrade of US Credit Rating

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of six major currencies, fell during early Asian trading on Monday, retreating to around 100.40. The decline follows Moody’s decision to downgrade the US credit rating from Aaa to Aa1, a move that has shaken investor confidence and added to mounting fiscal concerns.

Moody’s cited the growing US federal debt burden, rising interest expenses, and long-term structural imbalances in its downgrade statement. The agency now expects US federal debt to rise to approximately 134% of GDP by 2035, up from 98% in 2023, with the federal deficit projected to widen to nearly 9% of GDP. The downgrade aligns with earlier moves by Fitch Ratings in 2023 and Standard & Poor’s in 2011.

Despite the downgrade-driven pressure, the Greenback found some limited support from renewed optimism over trade negotiations. Hopes for a 90-day trade ceasefire between the US and China, along with potential agreements with other trading partners, have helped temper some of the bearish sentiment.

In an interview with CNN on Sunday, US Treasury Secretary Scott Bessent emphasized that President Donald Trump intends to reimpose higher tariffs on nations that fail to negotiate trade deals “in good faith,” further underscoring the administration’s aggressive trade stance.

With the DXY slipping after four consecutive weeks of gains, traders are now watching upcoming Federal Reserve commentary, inflation data, and geopolitical developments for further clues on the US Dollar’s direction.