TOKYO: The dollar inched higher versus a basket of major currencies on Tuesday, clinging above a three-year low set last week, but its outlook was clouded by concerns that the ballooning U.S. fiscal deficit could disrupt the economy.
The dollar´s index versus six major peers stood at 89.347, about 1.2 percent above Friday´s three-year low of 88.251.The dollar has been weakening in recent months, with the positive impetus from rising U.S. interest rates offset by a barrage of bearish factors. Initially, the view that other central banks will catch up with the Federal Reserve in tightening policy this year was cited as a reason for the dollar´s underperformance.
Then came comments from U.S. Treasury Secretary Steven Mnuchin, which stoked concerns the United States could pursue a weaker dollar policy as its trade deficit rose to highest level in almost a decade. Mounting worries about the U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019 amid a government spending splurge and large corporate tax cuts, have also undermined the greenback.
"The dollar has been falling continuously, but with changing themes. At the moment, a projected increase in U.S.debt issuance, a reduction in Fed bond buying and bulging U.S. fiscal deficit are the main focus," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
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