US Dollar Slides on Debt Concerns and Trump’s Tax Bill Debate

The US dollar extended its decline Tuesday as investors grew increasingly wary over the country’s rising debt burden linked to President Donald Trump’s sweeping tax and spending proposals. Markets remained cautious amid Senate debates on a tax-cut bill projected to add $3.8 trillion to the national debt over the next decade, according to the Congressional Budget Office.

The recent downgrade of the US sovereign credit rating by Moody’s on May 16 and concerns over expanded Treasury issuance have deepened investor unease. Chris Weston, head of research at Pepperstone, noted that “all roads have led to a weaker USD,” citing the perceived ballooning deficits and a shift away from dollar-denominated assets.

While global markets climbed on Monday during the US holiday, the dollar struggled. Trump’s last-minute decision to delay a planned 50% tariff hike on EU imports provided a boost to the euro, which climbed to a one-month high. European Central Bank President Christine Lagarde remarked that the euro could rival the dollar globally if the bloc strengthens its financial and security systems.

The dollar index dipped 0.1%, marking its third straight day of losses. The greenback fell 0.3% to 142.35 yen, while the euro edged up 0.1% to $1.1399. The British pound also gained 0.1% to $1.3581. Meanwhile, the New Zealand dollar held steady at $0.5999 after reaching a six-month peak on Monday. Traders now await the Reserve Bank of New Zealand’s interest rate decision on Wednesday, with a rate cut to 3.25% widely anticipated.

Ongoing volatility around US fiscal policy and global trade remains a key driver of currency market sentiment.