The Bloomberg Dollar Spot Index fell by 0.5% on Wednesday, reaching a two-week low — its third consecutive decline. The dollar came under pressure as markets looked ahead to the G7 finance ministers’ meeting, hoping for clues about whether the Trump administration supports a weaker dollar.

The drop in the dollar was accompanied by a move into safe-haven assets: the yen and Swiss franc strengthened following reports of a possible Israeli strike on Iran’s nuclear facilities. Options markets reflected the most bearish sentiment toward the dollar in the past five years.

Japanese Finance Minister Katsunobu Kato said he plans to discuss currency policy with U.S. Treasury Secretary Scott Bessent. South Korea has also confirmed recent talks with the U.S. on exchange rate matters.

Further pressure on the dollar came from growing concerns over the U.S. budget. Lawmakers are debating a tax reform package with potential revenue losses of up to $3.8 trillion over ten years. This comes after Moody’s downgraded the U.S. credit rating due to persistent fiscal deficits.

Analysts at Brown Brothers Harriman stated that “markets are losing confidence in U.S. policy” due to stagflation risks, growing debt burdens, and weak trade positions. Morgan Stanley expects the dollar to continue weakening as interest rate differentials narrow and the U.S. loses its economic edge.