Dollar hits 3-year low as confidence in Fed independence shakes

The dollar fell sharply in Asian trade on Monday as investor confidence in the US economy continued to be dented by US President Donald Trump’s plans to overhaul the Federal Reserve, which would raise questions about the central bank’s independence.

White House economic adviser Kevin Hassett said last Friday that the president and his team are continuing to study whether they could fire Fed Chairman Jerome Powell, just a day after Trump said firing Powell “can’t happen fast enough” as he called on the Fed to cut interest rates.

“Powell doesn’t report directly to Trump, so (Trump) can’t really fire him. He can only be removed under certain procedures that one would think have a higher hurdle… but can the president move the cogs and wheels to undermine the Fed’s supposed independence? It’s certainly possible,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho.

“I don’t think they even need to fire Powell right away. You just need to create the perception that you can fundamentally change the view of an independent Fed,” he added.

That further eroded investor confidence in the U.S. economic outlook and sent U.S. assets tumbling. The U.S. dollar index, which measures the greenback against six major currencies, fell to a three-year low of 98.61 on Monday.

The euro rose to a three-year high of $1.1476, while the dollar last traded 0.58% lower at 141.40 yen.

Accordingly, the USD fell to a three-year low against the euro at 1.1476 USD. The greenback also fell 0.58%, hitting a seven-month low against the yen at 141.40 JPY/USD; down 0.9% against the Swiss franc at 0.8119 USD/CHF.

While the British pound rose to its highest since October 1, 2024 at $1.3339; the Australian dollar also hit a two-month high of $0.6396; the New Zealand dollar rose 0.46% to $0.5964.

Trading was thin as markets in Australia and Hong Kong were closed for the Easter holiday. Most global markets were closed on Friday for a holiday.

“This is really a buffet for any dollar bull… from the increased uncertainty around the self-inflicted damage from tariffs to the loss of confidence even before the Powell news,” Varathan said.

Trump's sweeping tariffs and uncertainty over his trade policy have sent global markets plunging and darkened the outlook for the world's largest economy, weakening the dollar as investors pull money out of US assets.

The offshore yuan rose about 0.1 percent to 7.2966 per dollar.

China is widely expected to keep its benchmark lending rate unchanged at its monthly meeting later on Monday, but markets are betting on more stimulus measures to come soon amid escalating Sino-U.S. trade tensions.

Source: https://thoibaonganhang.vn/dong-usd-tao-day-3-nam-khi-niem-tin-vao-su-independence-cua-fed-lung-lay-163087.html