The dollar index edged higher to 102.7 on Tuesday, after concerns over the health of the banking sector and weak trade data from China prompted a flight to safety. Moody’s cut the credit rating for 10 small to mid-sized US banks and warned it may downgrade major lenders. The rating agency said “many banks’ Q2 results showed growing profitability pressures that will reduce their ability to generate internal capital” as a “mild recession looms and asset quality looks set to decline” particularly in some banks’ commercial real-estate portfolio. Meanwhile, a surprise 40% levy on banks’ extra profits imposed by the Italian government also weighed. In China, exports and imports fell much more than expected, continuing to point to a lacklustre recovery in the world’s second largest economy. Traders also await US inflation data on Thursday for further clues on the Fed’s next steps. The greenback strengthened across the board, with the most pronounced buying activity against the Aussie.
