TOKYO/LONDON : U.S. fiscal concerns and a tepid auction of Treasury bonds kept the dollar pinned near a two-week low on Thursday, while the U.S. Congress moved closer to passing President Donald Trump’s bill for massive cuts in taxes and spending.
The lacklustre 20-year bond sale reinforced the “Sell America” narrative, weighing not just on the dollar but on Wall Street as well, with traders already jittery after Moody’s cut the triple-A U.S. credit rating last week.
Bitcoin pushed to an all-time high on Thursday, partly as investors sought out alternatives to U.S. assets. Gold also benefited, reaching an almost two-week top of $3,325.79 and putting it within $175 of April’s record peak.
Trump’s sweeping tax bill cleared a crucial hurdle on Thursday as the House of Representatives voted roughly along party lines to begin a debate that would lead to a vote on passage later in the morning.
House passage would set the stage for weeks of debate in the Republican-led Senate.
“The view is that, with this bill, Trump is playing with fire with the deficit,” said Francesco Pesole, FX strategist at ING.
“It’s causing a coordinated sell-off in equities and Treasuries, and the ‘Sell America’ theme is obviously quite negative for the dollar,” Pesole added.
The nonpartisan Congressional Budget Office estimates the bill will add $3.8 trillion to the $36.2 trillion in U.S. debt over the next decade.
The dollar slipped 0.5 per cent to 142.94 yen, its weakest level since May 7.
It had managed an early pop of as much as 0.5 per cent when Japanese Finance Minister Katsunobu Kato said he did not talk about foreign-exchange levels in his discussions with U.S. Treasury Secretary Scott Bessent on the sidelines of the Group of Seven meetings in Canada.
However, the short-lived response suggests investor suspicions run deep that the White House wants a weaker dollar versus many Asian currencies.
South Korea’s currency jumped on Wednesday to 1,368.90 per dollar, its strongest level since November 4, after the Korea Economic Daily reported that Washington had demanded Seoul come up with measures to boost the won. It retreated to 1,379.6 per dollar on Thursday.
The euro was down less than 0.1 per cent at $1.1326, after rising 0.4 per cent on Wednesday for a third straight session.
Euro zone business activity unexpectedly contracted this month, HCOB’s preliminary composite Purchasing Managers’ Index showed on Thursday.
Sterling was 0.1 per cent higher at $1.3436.
The dollar index, which measures the U.S. currency against six peers, was last down about 0.1 per cent at 99.51, just above yesterday’s two-week low of 99.333.
Bitcoin climbed as high as $111,862.98, a fresh all-time peak and a 3.3 per cent increase from Wednesday’s close.
“Bitcoin is fast approaching $112,000 and trading at a new record as hopes increase that stablecoin regulation will soon pass after the advancement of legislation yesterday,” said Jim Reid, global head of macro and thematic research at Deutsche Bank in a note.
“The U.S. debt instability has probably helped too.”
