Dollar set to snap 4-week winning streak on US fiscal health worries
After Moody's last week downgraded its U.S. debt ratings, investor attention this week has honed in on the country's $36 trillion debt pile and U.S. President Donald Trump's tax bill that could add trillions of dollars more to it.
Dubbed by Trump as a "big, beautiful bill", it narrowly passed Republican-controlled U.S. House of Representatives and now heads to the Senate for what is likely to be weeks of debate.
The dollar index , which compares the U.S. currency against six other units, including the yen and euro, is set for 1.1% decline this week though it was little changed at 99.829 in early Asia trade.
That's despite a steep selloff in U.S. Treasuries at the start of the week. The 30-year bond yield stayed above 5% in Asian hours on Friday, hovering near 19 month highs. It is close to October 2023's high of 5.179%, a break past which would take it to its highest since mid-2007.
The elevated yield hasn't underpinned the dollar as investors flee U.S. assets in a "Sell America" move similar to last month.
"What has become quite stark this week is the reaction function in broad markets to the rise in U.S. long-end Treasury yields," said Chris Weston, head of research at Pepperstone.
Weston said higher yields are not being driven by improved growth dynamics, but by concerns of increasing fiscal recklessness, deficit spending and the perception of higher interest expenses.
"Add in the toxic mix of higher inflation expectations ... and the net effect has been a strong rise in 'term premium' and the would-be foreign buyers simply staying out of the market."
The euro strengthened 0.21% to $1.1303 in early trading and is set for a 1.2% gain for the week.
The yen was steady at 143.84 per dollar, also on course for a 1.2% rise for the week, after Japan's core inflation accelerated at its fastest annual pace in more than two years in April, raising the odds of another interest rate hike by year-end.
The data underscores the quandary facing the Bank of Japan which must grapple with price pressures from persistent food inflation as well as economic headwinds from Trump's tariffs.
Super-long Japanese government bonds have also scaled record highs this week, although they were steady on Friday.
"Japan's inflation unsurprisingly was again reported to be firm. This might augment the turbulence in JGBs in the long end," said Krishna Bhimavarapu, APAC economist at State Street Global Advisor.
The Swiss franc was slightly stronger at 0.8272 per dollar, also set for a 1.2% rise for the week after two weeks of losses.
Elsewhere, the Australian dollar , often seen as a proxy for risk appetite, is set to end the week and month broadly flat against the greenback. The Aussie last fetched $0.6422.
Australia's central bank on Tuesday cut its cash rate to a two-year low of 3.85%, citing a darker global outlook and cooling inflation at home.
New Zealand dollar was 0.2% stronger at $0.59095, set for a small rise for the week.
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The Independent
3 minutes ago
- The Independent
For hope on climate change, UN chief is putting his faith in market forces
For nearly a decade United Nations Secretary-General Antonio Guterres has been using science to warn about evermore dangerous climate change in increasingly urgent tones. Now he's enlisting something seemingly more important to the world's powerful: Money. In an exclusive interview with The Associated Press, Guterres hailed the power of market forces in what he repeatedly called 'a battle' to save the planet. He pointed to two new UN reports showing the plummeting cost of solar and wind power and the growing generation and capacity of those green energy sources. He warned those who cling to fossil fuels that they could go broke doing it. ' Science and the economy show the way,' Guterres said in a 20-minute interview in his 38th-floor conference room overlooking the New York skyline. 'What we need is the political will to take the decisions that are necessary in regulatory frameworks, in financial aspects, in other policy dimensions. Governments need to take decisions not to be an obstacle to the natural trend to accelerate the renewables transition.' That means by the end of the fall governments need to come up with new plans to fight climate change that are compatible with the global goal of limiting warming and ones that apply to the their entire economy and include all greenhouse gases, Guterres said. But don't expect one from the United States. President Donald Trump has pulled out of the landmark Paris climate agreement, slashed efforts to boost renewable energy and made fossil fuels a priority, including the dirtiest one in terms of climate and health, coal. 'Obviously, the (Trump) administration in itself is an obstacle, but there are others. The government in the U.S. doesn't control everything,' Guterres said. Sure, Trump pulled out of the Paris accord, but many states and cities are trying to live up to the Biden administration's climate-saving goals by reducing the burning of coal, oil and natural gas that release heat-trapping gases, Guterres said. Invest in fossil fuels, risk stranded assets? 'People do not want to lose money. People do not want to make investments in what will become stranded assets,' Guterres said. 'And I believe that even in the United States, we will go on seeing a reduction of emissions, I have no doubt about it.' He said any new investments in exploring for new fossil fuel deposits 'will be totally lost' and called them 'just a waste of money.' 'I'm perfectly convinced that we will never be able, in the history of humankind, to spend all the oil and gas that was already discovered,' Guterres said. 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'We see the acceleration of different aspects of climate change., rising seas, glaciers melting, heat waves, storms of different kinds," he said. 'We need to go on fighting,' he said. 'I think we are on the right side of history.' Guterres, who spoke to AP after addressing the U.N. Security Council on the Israeli occupation of Gaza, said there's only one way to solve that seemingly intractable issue: An immediate ceasefire, a release of all remaining hostages, access for humanitarian relief and 'paving the way for a serious political process leading to the two-state solution. Some people say the two-state solution is now becoming extremely difficult. Even some saying it's impossible. But the question is, what is the alternative?' Gaza, Ukraine and Sudan are all crises, Guterres said, but climate change is an existential problem for the entire planet. And he said people don't realize how climate-caused droughts and extreme weather can feed poverty and terrorism. 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BBC News
4 minutes ago
- BBC News
UK govment go cut foreign aid and Africa go dey more impacted
Di UK govment don reveal details of dia plans to cut foreign aid, and support for children education and women health for Africa go chop di biggest reductions. Dem bin don tok for February dis year say dem go slash foreign aid spending by 40% - from 0.5% of dia Gross National Income (GNI) to 0.3% - in order to increase dia defence spending. Dis dey come afta di US President Donald Trump bin approve ogbonge cut for foreign aid, including dissolving di United States Agency for International Development (USAID), di major agency wey dey oversee US aid programmes around di world. BBC don report how di US aid cuts go impact Africa especially pipo wey get serious health challenges like HIV/Aids, Tuberculosis, and also maternal and child health. One report from di UK Foreign Office show say di biggest cuts dis year na for Africa, and dis go get ogbonge impact on women health and water sanitation and di risk of disease and death fit increase. UK network of aid organisations, Bond, say na women and children for di most marginalised communities go pay di highest price. "E dey concerning say bilateral funding for Africa, gender, education and health programmes go drop. Di most marginalised communities for di world, particularly dose wey dey experience conflict, and women and girls, go pay di highest price for di political choices," Bond policy director Gideon Rabinowitz tok. "For dis time wen di US don stop all gender programming, di UK suppose to be stepping up, not stepping back." Di UK govment explain say di cuts follow "a line-by-line strategic review of aid" by di minister, focusing on "prioritisation, efficiency, protecting planned humanitarian support and live contracts while ensuring responsible exit from programming wia necessary". Di Foreign Office say bilateral support for some kontris go decrease and multilateral organisations wey no dey perform well go chop funding cuts. But dem neva announce di particular kontris wey go dey affected. Official UK figures show say at 0.5% of GNI, di UK aid budget by 2027 suppose be around £15.4 billion, but based on dis new target of 0.3%, di amount go be just about £6.1 billion. Wen di goment bin first make di announcement in February, some opposition members of di parliament including di Leader of di Opposition, Kemi Badenoch, bin welcome di increase for defence spending and she also support di decision to reduce di UK aid budget in order to finance it. Oda politicians like di leader of di Liberal Democrats, Ed Davey, support to increase defence spending, but e say cutting di aid budget too much go "leave a vacuum for Russia and China to fill". However, Anneliese Dodds, wey be di International Development Minister dat time, resign from her position afta di decision. She say reducing aid funding fit lead to a UK pull-out from plenty African, Caribbean and Western Balkan kontris, at a time wen Russia and China dey increase dia own actions for dis kontris. Why di UK dey cut foreign aid? According to Prime Minister Keir Starmer, govment go use di money wey dem save from aid funding to increase dia defence spending to 2.5% of dia GDP by 2027 and 3% by 2030. E mean say di UK go dey spend extra £13.4 billion on defence from 2027. Anoda reason, according to di UK Trade Minister Douglas Alexander, be say di money no too dey again and di UK public no longer support too much spending on international aid. Even if moni no dey tight, you go need to make di argument for investment in foreign aid, oga Alexander tell BBC for one interview in June. "I tink we don lose dat argument at various points. We get interest to build a stable, more equal, more safe world for our future generations, but public consent don withdraw," e tok. Wetin dis go mean for Africa and which kontri go be worst hit? Di UK dey provide support in terms of aid to Africa across plenty sectors like health, education, governance, humanitarian assistance and more. Malaria No More UK, one UK charity organisation wey dey help combat malaria across Africa, say di cutting of funding go "reset di clock on di progress wey we don make in saving children lives by fighting malaria". Astrid Bonfield, wey be di oga for Malaria No More UK tok for one statement say: "We must remember say even though international aid na for abroad we dey spend am, di benefits na for home here we dey feel am because e dey make di UK safer, healthier and more prosperous." Though di goment no mention kontris wey go dey more impacted by dis cuts, but kontris wey dey experience serious crisis and climate change wahala like Sudan, South Sudan, Chad, Niger, Ethiopia, etc, fit feel di impact more. Di Nigeria govment bin sign eight partnership agreements wit di UK govment dis year wey worth about N589 billion. E neva dey clear now weda dis agreements go dey impacted by di decision to cut foreign aid funding. Oda western kontris wey don reduce aid funding Apart from di US where President Trump bin cancel more dan 80% of all programmes wey USAID bin dey carry out, France, Germany, and Sweden don also reduce dia foreign aid funding well-well between 2024 and 2025. According to Donor Tracker - one website wey dey track all foreign aids wey kontris dey give - France cut dia Official Development Assistance (ODA) budget by $1.5 billion for dia 2025 budget. Dis represent 23% decrease to compare to dia 2024 budget. Germany for dia 2025 budget also reduce di funding for dia ODA-relevant ministries by about 19.8 billion Euros. 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Reuters
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Sarepta's licensing partner Arrowhead expects near-term payments despite setbacks
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