Reuters: The dollar is hovering near its lowest level in three years on Tuesday, pressured by President Donald Trump’s repeated criticism of the Federal Reserve chief, which has undermined investor confidence in the U.S. economy.
The U.S. currency remains close to its decade-low against the Swiss franc and is near a 3.5-year low against the euro.
Trump's Criticism of Fed Chair Powell
Trump intensified his criticism of Fed chief Jerome Powell on Monday, labeling him a “major loser” and urging him to lower interest rates immediately to prevent an economic slowdown.
Earlier, White House economic advisor Kevin Hassett mentioned that the president’s team was exploring options to potentially remove Powell from his position.
Federal Reserve's Stance
Powell stated last week that the central bank can afford to be patient regarding policy adjustments, suggesting rates should remain steady until there is clear evidence that U.S. tariff plans will not lead to sustained higher inflation.
Market Concerns
Eric Kuby, chief investment officer at North Star Investment Management, highlighted the “terrible stalemate” between Trump and Powell, raising concerns about potential actions to replace Powell, which could trigger a “real panic” in the dollar’s value.
Trade War Impact
The ongoing trade tensions add to the anxiety, with no deals in sight to alleviate concerns about the potentially destructive impact of Trump’s policies on the economy.
China has accused Washington of misusing tariffs and cautioned against broader economic agreements with the U.S. that come at China's expense, escalating the trade war between the two largest economies.
Currency Performance
- Swiss Franc: The dollar was steady at 0.8095 against the Swiss franc, close to the decade-low of 0.8042.
- Japanese Yen: The U.S. currency traded at 140.99 yen, near Monday’s seven-month low of 140.48.
- Euro: The euro remained stable at $1.1502, following a rise to $1.1573 on Monday, a level not seen since November 2021.
- Sterling: Sterling held steady at $1.3376 after hitting $1.3421, its highest since September, at the start of the week.
Expert Analysis
Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, noted that the dollar remains vulnerable due to ongoing speculation about the independence of U.S. monetary policy under Trump.
He suggested that a significant sell-off in the U.S. government bond or equity market might be necessary to dissuade President Trump from commenting on monetary policy.
Dollar Index
The U.S. dollar index, measuring the dollar against six major currencies, stood at 98.454, after dropping to 97.923 in the previous session, a level unseen since March 2022.
Australian Dollar
The risk-sensitive Australian dollar reached a four-month peak of $0.6436 on Monday and remained near that level, trading at $0.6414.