The US dollar fell to a three-year low on Monday as President Trump intensified his criticism of Federal Reserve Chairman Powell. The market is concerned that Trump's remarks could threaten the independence of the Federal Reserve. Trump called Powell a "loser" on social media and demanded an immediate interest rate cut, which further undermined investors' confidence in the US economy.
Following Trump’s comments, the dollar hit a low of 97.923 against a basket of currencies, the lowest level since March 2022. The dollar fell to a ten-year low against the Swiss franc, while the euro surpassed $1.15, reaching its highest level since 2021. Meanwhile, the dollar also fell to a seven-month low against the yen, last reported at 140.66 yen.
Trump's comments not only affected the foreign exchange market, but also raised concerns about the Federal Reserve's independence. National Economic Council Director Hassett said last Friday that the President and his team were considering whether Powell could be removed, while Trump indicated that dismissing Powell would be “the sooner the better.” However, market analysts noted that since Powell does not report directly to the President, Trump cannot directly fire him and would need to go through more complex procedures.
Nonetheless, Trump's continued attacks on the Federal Reserve have made investors uneasy, casting doubts on the direction of future economic policy. Vishnu Varathan, head of Mizuho Asia macro research, stated that even though the Federal Reserve has guarantees of independence, Trump can still influence its decisions in various ways, further undermining its independence.
Global stock markets were also affected, with US stocks plummeting on Monday as all three major indexes fell more than 2%, with tech stocks faring the worst, dragging down the tech-heavy Nasdaq index the most.
Additionally, Trump's tariff and trade policy uncertainties have put pressure on global markets, leading investors to withdraw from US assets, further pushing down the dollar's exchange rate. According to data from the US Commodity Futures Trading Commission (CFTC), net long positions in the yen reached an all-time high in the week ending April 15, indicating a rising demand for the yen as a safe haven.
Meanwhile, other major currencies performed strongly, with the pound rising to its highest level since September at $1.34, the Australian dollar reaching a four-month high of $0.6430, and the New Zealand dollar breaking $0.6000 for the first time. As the global economic outlook becomes increasingly uncertain, the dollar's weak performance also reflects investors’ uncertainty and concern about the future of the US economy.
