Dollar nosedives to three-year low as Trump declares war on Federal Reserve
The dollar tumbled to its lowest level in three years as investor confidence in the U.S. economy took another hit over President Donald Trump's attacks on the Federal Reserve chairman, potentially putting the central bank's independence under threat.
Trump ramped up his criticism of Fed Chair Jerome Powell on April 21 via social media, calling him a "major loser" and demanding that he lower interest rates immediately.
Against a basket of currencies, the dollar slid as low as 97.923 =USD, its lowest since March 2022. The currency also fell to a decade-low against the Swiss franc CHF=EBS, while the euro EUR=EBS broke above $1.15.
White House economic adviser Kevin Hassett said April 18 that the president and his team were studying whether they could fire Powell, just a day after Trump said Powell's termination "cannot come fast enough" as he called for the Fed to cut interest rates.
Trading was thin with most European markets and those in Australia and Hong Kong closed for Easter Monday. Most markets globally were closed April 18 for a holiday.
"Powell does not report directly to Trump, so (Trump) cannot actually fire him. He can only be removed from office under certain procedures, which one would think have a higher barrier," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. "But can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure, he could."
Against the Swiss franc CHF=EBS, the dollar sank more than 1.5% to a 10-year trough of 0.8063, while the euro EUR=EBS peaked at $1.1535, its highest since November 2021.
The dollar also hit a seven-month low against the yen JPY=EBS. CFTC data showed net-long positions on the Japanese yen hit a record high for the week ended April 15.
"If the central bank’s dual mandate − preserving price stability and fostering full employment − is diluted with a new set of objectives defined by the White House, policymakers could find themselves unable to tighten policy dramatically in the face of a sudden increase in prices," Karl Schamotta, chief market strategist at Corpay in Toronto, said in a research note.
Sterling GBP=D3 rose to its highest since September at $1.34, and the Australian dollar AUD=D3 scaled a four-month high of $0.6430. The New Zealand dollar NZD=D3 reclaimed the $0.6000 level for the first time in more than five months.
"It's really a buffet for any dollar bear ... from the heightened uncertainty around the self-harm from tariffs to the loss of faith even prior to the Powell news," Varathan said.
Trump's sweeping tariffs and uncertainty over his trade policies have sent global markets into a tailspin and darkened the outlook for the world's largest economy, in turn weakening the dollar as investors pull money out of U.S. assets.
Elsewhere, the onshore yuan CNY=CFXS rose to a two-week high before paring some of those gains. Its offshore counterpart CNH=D3 similarly touched a one-week top of 7.2911 per dollar.
China kept its benchmark lending rates steady for the sixth successive month, matching expectations. But markets are betting on more stimulus being rolled out soon in the face of the escalating China-U.S. trade war.
Reporting by Hannah Lang in New York and Rae Wee in Singapore; Editing by Shri Navaratnam, Gerry Doyle, Christian Schmollinger and Jane Merriman