The United States of America dollar, on Monday, May 14. headed for its fourth successive day of losses as broad risk appetite returned and investors questioned whether a recent rally by the greenback had run out of steam.
The dollar index against a basket of six major currencies fell 0.3 percent on Monday to 92.402, backing further away from last week’s 2018 peak.
The index hit a 4-1/2-month high last Wednesday, as a rise in U.S. Treasury yields highlighted the wide interest rate gap between the United States and other countries.
But the surge was stemmed by soft April U.S. consumer price data published last week that introduced doubts about expectations that the Federal Reserve would raise rates as many as four times in 2018.
Growing worries about the U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019 due to a government spending splurge and large corporate tax cuts, have also undermined the dollar along with concerns about the country’s current account deficit.
“Barring a significant, and unlikely, pickup in productivity, a persistent USD rally is unlikely as the twin deficits crowd out private investment by raising borrowing costs,” said Hans Redeker, global head of currency strategy at Morgan Stanley in London, in a note.
Economists say President Donald Trump’s tax cuts and spending plans could backfire by overheating an already strong economy and causing an unwanted pick-up in inflation.
The Australian dollar on the other hand, rose 0.1 percent to $0.7558 after rallying back from an 11-month low of $0.7413 plumbed on Wednesday.
Malaysian Ringgit Tumbles to Four-month Low
The Malaysian ringgit dropped to a four-month low on its first day of trade following Mahathir Mohamad’s stunning win in the country’s general election last week.
The ringgit weakened as much as 0.9 percent to 3.985 versus the dollar on Monday, as traders came to grips with the election defeat of the coalition that had ruled the country for six decades.
The Malaysian stock exchange last week extended trading holidays to Thursday and Friday after the government declared them public holidays following the election results, Reuters reports.
