Dollar weakens on concerns about Fed’s independence under Trump

SINGAPORE – The dollar tumbled on Monday as investor confidence in the US economy took another hit over President Donald Trump’s plans to shake up the Federal Reserve, which would throw into question the independence of the central bank. 

White House economic adviser Kevin Hassett said on Friday that the president and his team were continuing to study whether they could fire Fed Chair Jerome Powell, just a day after Trump said Powell’s termination “cannot come fast enough” as he called for the Fed to cut interest rates. 

The dollar sank to a three-year low against the euro, hit a seven-month trough on the yen and slid 0.9% against the Swiss franc early in the Asian session on Monday, as an ongoing crisis of confidence in the greenback continued to play out. 

Trading was thinned with markets in Australia and Hong Kong closed for Easter Monday. Most markets globally were closed on Friday 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… but can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure, he could,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. 

“I would argue that they don’t even need to sack Powell immediately. You just need to create the perception that you could fundamentally change the view of an independent Fed.” 

The euro scaled a three-year top of USD 1.1476, while the dollar last traded 0.58% lower at JPY 141.40. 

The sterling peaked at USD 1.3339, its highest since October 1, while the Australian dollar hit a two-month top of USD 0.6396. 

“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 US assets. 

Against a basket of currencies, the dollar slid to a three-year low of 98.623 on Monday. 

The greenback was down 0.9% against the Swiss franc at 0.8119, while the New Zealand dollar rose 0.46% to USD 0.5964. 

Elsewhere, the offshore yuan was up roughly 0.1% at 7.2966 per dollar. 

China is widely expected to leave its benchmark lending rates unchanged at the monthly fixing later on Monday, but markets are wagering on more stimulus being rolled out soon in the face of an escalating Sino-US trade war. 

(Reporting by Rae Wee; Editing by Jamie Freed)