Dollar extends slide with G-7 meeting, budget deficit in focus

A gauge of the dollar fell to a two-week low as traders focused on the Group-of-7 meeting for any signs that the Trump administration is seeking a weaker US dollar.

The Bloomberg Dollar Spot Index dropped 0.4% on Wednesday, falling for a third day. Japanese Finance Minister Katsunobu Kato said last week he will seek an opportunity for currency talks with his US counterpart Scott Bessent this week, amid speculation that President Donald Trump’s administration is open to a weaker greenback. South Korea has already confirmed it discussed currency issues with the US during talks earlier this month.

Worries about the US budget deficit are also weighing on the dollar. Legislators are in discussions about a tax-cut package, with Republicans trying to keep revenue losses down to $4.5 trillion over 10 years. In its current form, the loss would be $3.8 trillion. This comes after Moody’s downgraded US debt last week, citing a failure to halt a trend of large fiscal deficits.

“Rising fiscal concerns are fuelling a combined rise in long-end US yields and dollar decline,” said Moh Siong Sim, FX strategist at Bank of Singapore. “This could signal the market is losing its appetite to fund America’s twin deficits amid a re-think of overweight US exposure by non-US investors that is just getting started.”

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