US Dollar Index Slips to 99.50 as Fed Flags Economic Uncertainty

US Dollar Index Falls to 99.50 as Fed Officials Express Economic Worries and Trade Policy Concerns

The US Dollar Index (DXY), which measures the USD against a basket of six major currencies, extended its decline for the third consecutive session on Wednesday, falling below 99.70 and briefly touching 99.50 during the Asian session. The continued pressure on the Greenback comes as Federal Reserve officials voice increasing concerns about the direction of the US economy amid persistent policy uncertainty and trade-related disruptions.

Fed Officials Highlight Weakening Confidence

Recent comments from key Fed officials, including San Francisco Fed President Mary C. Daly and Cleveland Fed President Beth Hammack, suggest that although economic fundamentals remain relatively stable, both business and consumer confidence are beginning to show signs of strain. The officials linked the deteriorating sentiment partly to shifting US trade policy under the Trump administration, which has introduced greater unpredictability into business planning and global logistics.

Atlanta Fed President Raphael Bostic added to the cautious tone earlier this week, stating he supports only one interest rate cut in 2025. More notably, Bostic warned that the Trump administration's volatile tariff strategies pose a serious risk to the US trade system, which is heavily reliant on imports to meet domestic demand.

Moody’s Downgrade Adds to Pressure

Further weighing on the US Dollar is last week’s downgrade of the US sovereign credit rating by Moody’s. The agency cut its rating from Aaa to Aa1, citing long-term fiscal risks, growing debt levels, and political uncertainty. The downgrade has contributed to a broader loss of confidence in the USD and is reinforcing dovish expectations surrounding the Fed’s policy path.

Outlook for the Dollar

The combination of uncertain monetary policy signals, concerns over global trade stability, and weakening sentiment at home continues to challenge the Dollar’s resilience. With no immediate relief in sight and further Fed commentary expected later in the week, the DXY may remain under pressure as traders reassess the Greenback’s near-term direction.