Dollar value drop due to US credit rating reduction

The US dollar’s value dropped after Moody’s Agency (Moody’s) downgraded the US AA111 credit rating due to the large federal budget deficit, high financing costs and planned tax cuts.

The dollar dropped 1.9 percent last week compared to the six most important world currencies.

The euro compared to the dollar grew by 1.7 percent, or one euro was changed by $ 1,1360. The US currency dropped the value compared to the yen by 2.1 percent – one dollar changes by 142.55 yen.

US public debt is about $ 36.2 trillion and could rise by another $ 3.8 trillion in the next ten years, as US President Donald Trump plans to cut taxes. Because of this, yields from US government bonds have increased significantly, which means the government must borrow at a higher price.

Tax reductions would probably stimulate consumption and support economic growth, but on the other hand, public debt would increase if government costs did not decrease.

The pressure on the dollar stepped up two days ago, when Trump again threatened the European Union with customs duties of 50 percent from June 1, as it is unhappy with how the US -EU trade talks are advancing.