U.S. Dollar Takes a Hit Amid Credit Downgrade and Trade Tensions

The U.S. dollar fell to a one-week low against the yen following a downgrade of the U.S. credit rating by Moody's and trade concerns. The euro rose slightly, driven by these developments, while the Australian dollar recovered after recent declines due to expected RBA rate cut announcements.

The U.S. dollar experienced a decline to a one-week low against the yen on Monday, as the market reacted to Moody's unexpected downgrade of the U.S. government's credit rating and ongoing trade tensions. The Australian dollar, however, showed signs of recovery after multiple days of losses as traders anticipated Australia's Reserve Bank policy announcement.

Moody's decision to reduce the United States' sovereign credit rating by one notch highlighted concerns around the nation's growing debt, now tallying at $36 trillion. This move caused the dollar to dip against major currencies, despite prior weeks of strength linked to optimism about U.S. trade deals and improved relations with China.

In contrast, financial reports indicated positive developments as the U.S. initiated significant trade discussions with the European Union. Furthermore, President Trump secured progression on a tax cut bill expected to add trillions to national debt, fueling debate on the sustainability of U.S. economic growth.

(With inputs from agencies.)