The U.S. dollar plunged on Monday as investor confidence in the American economy took another blow following President Donald Trump’s escalating attacks on the Federal Reserve, raising fears about the central bank’s independence.
White House economic adviser Kevin Hassett confirmed on Friday that the administration was actively studying whether it could fire Federal Reserve Chair Jerome Powell. This followed Trump’s statement a day earlier that Powell’s termination "cannot come fast enough," alongside renewed demands for an aggressive cut in interest rates.
The growing uncertainty weighed heavily on the greenback. The dollar slumped to a decade-low against the Swiss franc and hit a seven-month low against the Japanese yen, while the euro surged to its strongest level in three years. Trading volumes were thinner than usual, with markets in Australia and Hong Kong closed for Easter Monday.
"Powell does not report directly to Trump, so the president cannot simply fire him. Removal would require specific procedures that carry a high legal barrier," explained Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. "But even without a formal dismissal, undermining the Fed’s perceived independence could have far-reaching consequences."
The euro reached a peak of $1.1533, while the dollar tumbled to 0.8070 Swiss francs, marking its lowest level in a decade. Against the yen, the dollar weakened by 1.1% to 140.63 yen. Data from the Commodity Futures Trading Commission (CFTC) revealed that net long positions on the Japanese yen reached a record high in the week ending April 15.
The British pound also gained ground, climbing more than 0.5% to $1.3380, its highest since October 1. Meanwhile, the Australian dollar rose to a two-month high of $0.6402.
"It's really a buffet for any dollar bear," Varathan noted. "From the heightened uncertainty caused by tariff policies to the deepening loss of faith following the Powell controversy, the environment is extremely negative for the dollar."
Trump’s sweeping tariffs and erratic trade policies have already rattled global markets and clouded the U.S. economic outlook. This has fueled an exodus from U.S. assets, further weakening the dollar.
Against a basket of major currencies, the dollar fell to a three-year low of 98.267. The New Zealand dollar also rose by more than 0.7% to a five-month high of $0.5981.
In China, the onshore yuan appreciated by roughly 0.2% to 7.2875 per dollar, with the offshore yuan standing at 7.2897. China’s central bank kept its benchmark lending rates steady for the sixth consecutive month, in line with expectations, but markets are anticipating additional stimulus measures as the Sino-U.S. trade tensions intensify.
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