The U.S. dollar weakened across the board on Monday after Moody’s downgraded the country’s credit rating from AAA to AA+, following similar moves by S&P and Fitch. The rating agency cited growing concerns over America’s unsustainable budget deficits and rising debt servicing costs, which pushed 30-year Treasury yields above 5% for the first time since November 2023.
The dollar index dropped 0.7% to 100.4 by late trading, as investors digested the implications of the downgrade alongside fresh recession warnings from Goldman Sachs. The bank maintained its view that elevated interest rates and tightening financial conditions continue to pose meaningful risks to economic growth in coming quarters.
Market reaction reflected broader concerns about U.S. fiscal health, though the dollar’s decline remained orderly as traders weighed the rating action against still-favorable yield differentials. The move comes at a delicate time for currency markets, with investors closely monitoring whether the Treasury selloff accelerates further or attracts bargain-hunting demand at these yield levels.
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