The dollar hovered near its lowest levels in three years on Tuesday, as President Donald Trump’s relentless attacks on Federal Reserve Chairman Jerome Powell deepened investor concerns about the U.S. economy.
The greenback lingered close to a decade-low against the Swiss franc and a 3-1/2-year trough versus the euro, amid growing fears over the independence of U.S. monetary policy.
In a sharp escalation, Trump posted on Truth Social Monday, labeling Powell a "major loser" and urging an immediate cut in interest rates to avoid an economic slowdown. On Friday, White House economic adviser Kevin Hassett confirmed that the administration continued to explore legal avenues to remove Powell, a day after Trump declared that Powell's termination "cannot come fast enough."
Powell recently emphasized the Fed's need for patience, stating that interest rates should remain steady until it becomes clearer that U.S. tariff policies will not trigger sustained inflation. However, Trump's public criticism has stirred speculation over Powell’s job security, raising the risk of significant market turmoil.
"There’s this terrible stalemate between Trump and Powell," said Eric Kuby, Chief Investment Officer at North Star Investment Management. "Concern is mounting that any move to replace Powell would spark real panic in the dollar."
Investor anxiety was further compounded by trade tensions. On Monday, China accused Washington of abusing tariffs and warned other countries against brokering broader economic agreements with the U.S., heightening fears of a prolonged trade war.
On the currency front, the dollar remained steady at 0.8095 Swiss franc, close to Monday’s decade-low of 0.8042. It was also hovering at 140.99 yen, near a seven-month low, while the euro held firm at $1.1502 after reaching $1.1573, its highest level since November 2021.
Sterling was little changed at $1.3376, sustaining its rally after touching a peak of $1.3421 on Monday, the highest since September.
"The longer the speculation about the independence of U.S. monetary policy continues, the longer the USD is at risk of falling," said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia. "It may take another sharp sell-off in the U.S. bond or equity markets to dissuade President Trump from further undermining the Fed’s credibility."
The U.S. dollar index, measuring the greenback against six major currencies, stood at 98.454, after dipping to 97.923 in the prior session — a level unseen since March 2022. Meanwhile, the risk-sensitive Australian dollar climbed to a four-month high of $0.6436 on Monday and was trading at $0.6414 in the latest session.
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