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Dollar Weakens on Fiscal and Trade Worries

The US dollar index fell to around 96.7 on Tuesday, its lowest level since February 2022, as growing concerns over the US fiscal outlook and trade uncertainty weighed on sentiment. Markets are closely watching the Senate’s progress on President Trump’s sweeping tax-cut and spending package, which is expected to add $3.3 trillion to the national debt.

At the same time, investors are awaiting developments on trade negotiations between the US and key partners, with Trump’s 90-day reprieve on broad reciprocal tariffs set to expire next week. Adding further pressure on the greenback, traders increased bets on deeper Federal Reserve rate cuts amid dovish signals from policymakers and ongoing pressure from Trump to reduce borrowing costs. The dollar dropped to a nearly four-year low against the euro and a three-and-a-half-year low against the British pound. Attention now turns to Thursday’s monthly jobs report for new signals on the strength of the US labor market.

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