Dollar Slips as U.S. Fiscal Fears Trigger Global Flight to Safety
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.
Follow Emirates 24|7 on Google News.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Gulf Today
2 hours ago
- Gulf Today
Less selection, More prices
With summer in full swing in the United States, retail executives are sweating a different season. It's less than 22 weeks before Christmas, a time when businesses that make and sell consumer goods usually nail down their holiday orders and prices. But President Donald Trump's vacillating trade policies have complicated those end-of-year plans. Balsam Hill, which sells artificial trees and other decorations online, expects to publish fewer and thinner holiday catalogs because the featured products keep changing with the tariff rates the president sets, postpones and revises. 'The uncertainty has led us to spend all our time trying to rejigger what we're ordering, where we're bringing it in, when it's going to get here,' Mac Harman, CEO of Balsam Hill parent company Balsam Brands, said. 'We don't know which items we're going to have to put in the catalog or not.' Months of confusion over which foreign countries' goods may become more expensive to import has left a question mark over the holiday shopping season. US retailers often begin planning for the winter holidays in January and typically finalize the bulk of their orders by the end of June. The seesawing tariffs already have factored into their calculations. The consequences for consumers? Stores may not have the specific gift items customers want come November and December. Some retail suppliers and buyers scaled back their holiday lines rather than risking a hefty tax bill or expensive imports going unsold. Businesses still are setting prices but say shoppers can expect many things to cost more, though by how much depends partly on whether Trump's latest round of 'reciprocal' tariffs kicks in next month. The lack of clarity has been especially disruptive for the US toy industry, which sources nearly 80% of its products from China. American toy makers usually ramp up production in April, a process delayed until late May this year after the president put a 145% tariff on Chinese goods, according to Greg Ahearn, president and CEO of the Toy Association, an industry trade group. The US tariff rate may have dropped significantly from its spring high - a truce in the US-China trade war is set to expire on Aug. 12 - but continues to shape the forthcoming holiday period. Manufacturing activity is way down from a year ago for small- and medium-sized US toy companies, Ahearn said. The late start to factory work in China means holiday toys are only now arriving at US warehouses, industry experts said. A big unknown is whether tariffs will keep stores from replenishing supplies of any breakout hit toys that emerge in September, said James Zahn, editor-in-chief of the trade publication Toy Book. In the retail world, planning for Christmas in July usually involves mapping out seasonal marketing and promotion strategies. Dean Smith, who co-owns independent toy stores JaZams in Princeton, New Jersey, and Lahaska, Pennsylvania, said he recently spent an hour and a half running through pricing scenarios with a Canadian distributor because the wholesale cost of some products increased by 20%. Increasing his own prices that much might turn off customers, Smith said, so he explored ways to 'maintain a reasonable margin without raising prices beyond what consumers would accept.' He ordered a lower cost Crazy Forts building set so he would have the toy on hand and left out the kids' edition of the Anomia card game because he didn't think customers would pay what he would have to charge. 'In the end, I had to eliminate half of the products that I normally buy,' Smith said. Hilary Key, owner of The Toy Chest in Nashville, Indiana, said she tries to get new games and toys in early most years to see which ones she should stock up on for the winter holidays. This year, she abandoned her product testing for fear any delayed orders would incur high import taxes. Meanwhile, vendors of toys made in China and elsewhere bombarded Key with price increase notices. For example, Schylling, which makes Needoh, Care Bear collectibles and modern versions of nostalgic toys like My Little Pony, increased prices on orders by 20%, according to Key. All the price hikes are subject to change if the tariff situation changes again. Key worries her store won't have as compelling a product assortment as she prides herself on carrying. 'My concern is not that I'll have nothing, because I can bring in more books. I can bring in more gifts, or I can bring in just things that are manufactured in other places,' she said. 'But that doesn't mean I'm going to have the best stock for every developmental age, for every special need.' The retail industry may have to keep taking a whack-a-mole approach to navigating the White House's latest tariff ultimatums and temporary reprieves. Last week, the president again reset the rates on imports from Brazil, the European Union, Mexico, and other major trading partners but said they would not take effect until Aug. 1. The brief pause should extend the window importers have to bring in seasonal merchandise at the current baseline tariff of 10%. The Port of Los Angeles had the busiest June in its 117-year history after companies raced to secure holiday shipments, and July imports look strong so far, according to Gene Seroka, the port's executive director. 'In my view, we're seeing a peak season push right now to bring in goods ahead of potentially higher tariffs later this summer,' Seroka said Monday. The pace of port activity so far this year reflects a 'tariff whipsaw effect' - imports slowing when tariffs kick in and rebounding when they're paused, he said. 'For us consumers, lower inventory levels, fewer selections and higher prices are likely as we head into the holidays.' Smith, who co-owns the two JaZams stores with his partner, Joanne Farrugia, said they started placing holiday orders two months earlier than usual for 'certain items that we felt were essential for us to have at particular pricing.' They doubled their warehouse space to store the stockpile. But some shoppers are trying to get ahead of higher prices just like businesses are, he said. He's noticed customers snapping up items that will likely be popular during the holidays, like Jellycat plush toys and large stuffed unicorns and dogs. Any sales are welcome, but Smith and Farrugia are wary of having to restock at a higher cost. 'We're just trying to be as friendly as we can to the consumer and still have a product portfolio or profile that is gonna meet the needs of all of our various customers, which is getting more and more challenging by the day,' Smith said. Balsam Brands' Harman said he's had to resign himself to not having as robust a selection of ornaments and frosted trees to sell as in years' past. Soon, it will be too late to import meaningful additions to his range of products. 'Our purpose as a company is to create joy together, and we're going to do our very best to do that this year,' Harman said. 'We're just not going to have a bunch of the items that consumers want this year, and that's not a position we want to be in.' Associated Press
Zawya
2 hours ago
- Zawya
UN HLPF 2025: GEEP, NYU launch Global Ideation Lab
H.E. Abdulla Lootah: The UAE's knowledge-sharing approach is comprehensive. It leverages contributions across sectors, both locally and globally, while providing an environment for the creation of innovative ideas and impactful development solutions The Global Ideation Lab, co-hosted by GEEP and NYU, helps build a global sandbox for innovative ideas, provides a creative open space, and gathers thought leaders and policymakers from government, academia, and university students The Ideation Lab highlighted the developmental role of initiatives that support global partnerships, including the UAE's GEEP, which serves as an incubator for cross-border partnerships and an effective knowledge-sharing platform New York, USA – The Government Experience Exchange Programme (GEEP), under the UAE Ministry of Cabinet Affairs, launched a Global Ideation Lab in collaboration with New York University (NYU). The Ideation Lab was held alongside the UAE delegation's participation at the High-Level Political Forum (HLPF) on Sustainable Development 2025, organized by the United Nations Department of Economic and Social Affairs at the UN Headquarters in New York City. It brought together leading experts, academics, UN officials, diplomats, policymakers, and university students to explore new prospects in government sector innovation and global cooperation. The session drew participation from 26 ministers, experts, academics, and UN officials, including Annemarie Hou, Executive Director of the UN Office of Partnerships, and Patrick Paul Walsh, Vice President of Education and Director of the SDG Academy at the UN Sustainable Development Solutions Network (SDSN). Attendees also included sustainability officials and diplomats from countries such as Switzerland, Portugal, Ireland, Serbia, Paraguay, Bahrain, Uzbekistan, Qatar, Kingdom of Eswatini, and others. Members of the UAE delegation to the HLPF, officials from NYU's administrative and academic bodies, and 30 students from NYU, Stanford, and the University of Pennsylvania also participated. Global Ideas Sandbox The Ideation Lab helps build a global ideas sandbox and provides a creative open space. It highlighted the developmental role of comprehensive initiatives supporting global partnerships, particularly the UAE's GEEP, which serves as an incubator for scalable cross-border partnerships and an effective knowledge sharing platform. UAE Commitment to Expanding Partnerships His Excellency Abdulla Nasser Lootah, Assistant Minister of Cabinet Affairs for Competitiveness and Experience Exchange and Chair of the National Committee on Sustainable Development Goals, stated that the UAE's knowledge-sharing approach is comprehensive, leveraging contributions across sectors locally and globally. This approach provides an environment for creating innovative ideas and impactful development solutions. 'In the UAE, we have successfully built a pioneering model for international cooperation based on knowledge exchange with countries and governments, and GEEP is a crucial part of this endeavor,' Lootah said. 'We are committed to involving various sectors, particularly academia, and cooperating with everyone in developing solutions to urgent global challenges, including developmental challenges, and expanding frameworks for sharing, transferring, and exchanging best government practices to help achieve sustainable development.' He added: 'The joint Global Ideation Lab between GEEP and NYU exemplifies the collaborative approach we adopt in the UAE to develop best practices that enhance readiness for present and future opportunities.' Challenge and Solution Model The Global Ideation Lab adopted a collaborative approach between GEEP and NYU, centered on posing challenges, linking academic insights with practical governance, and involving various stakeholders in designing partnership-based and scalable solutions. The session outcomes contributed to aligning knowledge inputs with policy, empowering stakeholders to participate in developing innovative solutions to urgent governance challenges, and accelerating progress towards the 2030 SDGs. UN High-Level Political Forum The HLPF on Sustainable Development is the UN's central platform for reviewing and advancing SDGs. Established in 2012, the forum plays a pivotal role in monitoring national and international progress on the 2030 Agenda. Participating delegations assess progress toward the SDGs, with this year's forum featuring in-depth reviews of five priority goals: SDG3 (ensuring healthy lives and promoting well-being for all at all ages); SDG5 (achieving gender equality and empowering all women and girls); SDG8 (promoting sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all); SDG14 (conserving and sustainably using the oceans, seas, and marine resources for sustainable development); and SDG17 (strengthening and revitalizing the Global Partnership for Sustainable Development).
Khaleej Times
3 hours ago
- Khaleej Times
Trump job cuts: US space agency Nasa to lose nearly 4,000 employees, 20% of workforce
The US space agency National Aeronautics and Space Administration (Nasa) will lose about 3,900 employees under Donald Trump's sweeping effort to trim the federal workforce — at the same time as the president prioritises plans for crewed missions to the Moon and Mars. In an emailed statement, Nasa said around 3,000 employees took part in the second round of its deferred resignation programme, which closed late Friday. Combined with the 870 who joined the first round and regular staff departures, the agency's civil servant workforce is set to drop from more than 18,000 before Trump took office in January to roughly 14,000 — a more than 20 per cent decrease. Those leaving the National Aeronautics and Space Administration on the deferred resignation programme will be placed on administrative leave until an agreed departure date. An agency spokesperson said the figures could shift slightly in the coming weeks. "Safety remains a top priority for our agency as we balance the need to become a more streamlined and more efficient organization and work to ensure we remain fully capable of pursuing a Golden Era of exploration and innovation, including to the Moon and Mars," the agency said. Earlier this year, the Trump administration's proposed Nasa budget put a return to the Moon and a journey to Mars front and centre, slashing science and climate programs. The White House says it wants to focus on "beating China back to the Moon and putting the first human on Mars." China is aiming for its first crewed lunar landing by 2030, while the US program, called Artemis, has faced repeated delays. Nasa is still run by an acting administrator after the administration's initial pick to lead the agency, tech billionaire Jared Isaacman — endorsed by former Trump advisor Elon Musk — was ultimately rejected by the Republican president.
