Dollar Demand After Fitch Signals Possible U.S. Rating Downgrade By

© Reuters – The US dollar rallied in Europe on Thursday, climbing to a two-month high as fears of a possible US default grew as Fitch threatened to downgrade its ratings.

At 02:55 ET (06:55 GMT), the exchange rate, which tracks the greenback against a basket of six other currencies, rose 0.2% to 103.955, just below the overnight peak of 104.05, highest level since mid-March.

The dollar’s safe-haven status means it has benefited from no progress in talks to lift the US government’s $31.4 trillion debt ceiling, with a deadline is early June which Treasury Secretary Janet Yellen said is when it is “very likely” the department will run out of cash withdrawals closer.

This uncertainty has resulted in ratings agency Fitch putting a highly rated “AAA” rating of the United States on its list of possible downgrades, adding to anxiety in the global market.

“Fitch still expects a debt limit resolution before date X,” the credit agency said in a report.

“However, we believe the risk has increased that the debt limit will not be raised or halted by date X and as a result, the government may start to miss payments on some obligations. mine.”

The dollar has also been boosted by a more hawkish view of the Federal Reserve’s monetary policy actions this year, with the US economy appearing resilient to the sharp tightening measures. strong so far.

from the Fed’s last meeting, announced Wednesday, showed officials were divided over whether more rate hikes are needed to lower inflation, but labor market and price pressures demonstrated better resilience than expected after that May meeting.

The data to be released late Thursday includes weekly US data and a second estimate for the US first quarter.

Elsewhere, it fell 0.1% to 1.0739, close to a two-month low, after data released early Thursday showed that , the largest in Europe, fell slightly in the first quarter of 2023 compared to the previous three months, thus entering Depression.

Officials there are inclined towards further rate hikes to tame, with Board member Bostjan Vasle being the latest to do so.

However, growth is hard to find in the region and this tone could soon change.

The head of the Bundesbank and the chief economist of the ECB are both expected to speak at the end of this session and their comments are likely to be carefully studied.

fell to 1.2363, not far from its weakest since April 3, while risk-sensitivity eased slightly to 0.6541.

fell to 139.45, just behind a six-month high, with the yen taking a hit after yields rose to highs not seen since mid-March.

rose 0.1% to 7.0685, with the pair nearing a near 6-month high as fears of a new COVID outbreak added to concerns about slowing economic growth in China.

rose 0.1% to 19.9163 ahead of the latest monetary policy decision by . It is expected to keep the rate unchanged for the third consecutive month as it tries to keep the lira stable just days before the presidential election.


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