Australia's Dollar turned higher following three days of declines ahead of Tuesday's Reserve Bank of Australia policy announcement, with a quarter-point cut widely expected.

Moody's cut the US’ top sovereign credit rating by one notch on Friday, the last of the major ratings agencies to downgrade the country, citing concerns about its growing $36 trillion debt pile.

The news saw the Dollar turn lower against its major rivals following four straight winning weeks when it was boosted by rising optimism for US trade deals and then a thaw in relations with China that eased fears of a global recession.

The greenback slipped as much as 0.6% to 144.80 yen for the first time since May 9 on Monday, while the Euro gained as much as 0.3%.

"While the decision itself is seen as a catch-up to S&P's move in 2011 and Fitch's announcement to do the same on 1 August 2023, Moody's decision could still feed USD bears," said Paul Mackel, Global Head of FX Research at HSBC.

"Given this rating erosion has been slow moving, the simple takeaway is Moody's step should not matter for the USD. But one needs to be careful with this assumption," Mackel said.

US Treasury Secretary, Scott Bessent said that US President, Donald Trump would impose tariffs at the rate he threatened last month on trading partners that do not negotiate in "good faith."

--Reuters--