Dollar Weakens Amid Concerns Over U.S. Economic Policy

SINGAPORE: The dollar experienced a decline on Monday as investors grew increasingly concerned about the U.S. economy, particularly in light of President Donald Trump’s plans to potentially alter the Federal Reserve, raising questions about the central bank’s autonomy.

Kevin Hassett, a White House economic advisor, stated on Friday that the president and his advisors were still considering the possibility of dismissing Fed Chair Jerome Powell. This came just a day after Trump expressed his desire for Powell’s termination, advocating for the Fed to lower interest rates.

The dollar’s value plummeted to a three-year low against the euro, reaching a seven-month low against the yen, and depreciating by 0.9% against the Swiss franc during early Asian trading on Monday. This reflected a continued lack of confidence in the U.S. currency.

Trading activity was subdued due to market closures in Australia and Hong Kong for Easter Monday. A majority of global markets were also closed on Friday for a holiday.

Vishnu Varathan, the head of macro research for Asia ex-Japan at Mizuho, commented, “Powell is not directly subordinate to Trump, so Trump cannot unilaterally remove him. His removal requires specific procedures with a high threshold… however, the president could potentially influence the perception of the Fed’s independence. You just need to create the perception that you could fundamentally change the view of an independent Fed.”

The euro reached a three-year peak at $1.1476, while the dollar traded lower by 0.58% at 141.40 yen.

The British pound reached its highest level since October 1 at $1.3339, and the Australian dollar hit a two-month peak at $0.6396.

Varathan added, “It’s a perfect storm for dollar bears… from the increased uncertainty around tariffs to the eroding confidence even before the Powell news.”

Trump’s extensive tariffs and the ambiguity surrounding his trade policies have destabilized global markets and cast a shadow over the outlook for the world’s largest economy, contributing to the dollar’s weakness as investors withdraw capital from U.S. assets.

Dollar’s Downward Trend

The dollar index, which measures the dollar against a basket of currencies, fell to a three-year low of 98.623 on Monday.

The dollar declined by 0.9% against the Swiss franc, trading at 0.8119, while the New Zealand dollar increased by 0.46% to $0.5964.

The offshore yuan saw an increase of approximately 0.1%, trading at 7.2966 per dollar.

It is widely anticipated that China will maintain its benchmark lending rates at the upcoming monthly fixing. However, markets anticipate further stimulus measures in response to the escalating trade conflict between China and the United States.