Dollar wallows near 3-year low as Trump’s attacks on Fed chief unnerve traders

TOKYO: The dollar languished near its lowest level in three years on Tuesday as President Donald Trump’s unrelenting attacks on the Federal Reserve chairman further eroded investor confidence in the US economy.

The US currency sagged close to the decade-low reached the previous day against the Swiss franc, and hovered near a 3-and-a-half-year trough versus the euro. Trump ramped up his criticism of Fed chief Jerome Powell on Monday in a Truth Social post, calling him a “major loser” and demanding that he lower interest rates “NOW” or risk an economic slowdown.

On Friday, White House economic adviser Kevin Hassett said the president and his team were continuing to study whether they could fire Powell, a day after Trump said Powell’s termination “cannot come fast enough”.

Trump’s onslaught comes after Powell last week said the central bank can afford to be patient in judging how to set policy, and that rates should not be lowered until it is clearer US tariff plans won’t stoke persistently higher inflation.

“There’s this terrible stalemate” between Trump and Powell, fomenting “concern that there will be some sort of action taken to replace Powell, which would create a real panic in the dollar,” said Eric Kuby, chief investment officer at North Star Investment Management.

Moreover, on the trade front, “every day that there are no deals struck to provide any relief, it creates continued anxiety” that Trump’s policies in their current form could be destructive for the economy, Kuby said.

China on Monday accused Washington of abusing tariffs and warned countries against striking a broader economic deal with the United States at its expense, ratcheting up its rhetoric in a spiralling trade war between the world’s two biggest economies.

The dollar was steady at 0.8095 Swiss franc, not far from the decade-low 0.8042 reached in the previous session.

The US currency bought 140.99 yen, hovering close to Monday’s seven-month low at 140.48. The euro was little changed at $1.1502, after jumping to $1.1573 on Monday for the first time since November 2021.

Sterling was stable at $1.3376 after surging as high as $1.3421 for the first time since September to start the week. “The longer the speculation about the independence of US 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 a other sell-off in the US government bond market or US equity market to encourage President Trump to refrain from such comments.”

The US dollar index measure against six major peers stood at 98.454, after sinking as low as 97.923 in the previous session, a level not seen since March 2022. Even the risk-sensitive Australian dollar climbed to a four-month peak of $0.6436 on Monday, and remained close to that level in the latest session, changing hands at $0.6414.