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NEW YORK – The dollar tumbled on Monday to its lowest level in three years as investor confidence in the US economy took another hit over President Donald Trump’s attacks on the Federal Reserve chairman, potentially putting the central bank’s independence under threat.

Trump ramped up his criticism of Fed Chair Jerome Powell on Monday via social media, calling him a “major loser” and demanding that he lower interest rates immediately.

Against a basket of currencies, the dollar slid as low as 97.923 on Monday, its lowest since March 2022. The currency also fell to a decade-low against the Swiss franc, while the euro broke above USD 1.15.

White House economic adviser Kevin Hassett said on Friday that the president and his team were continuing to study whether they could fire Powell, just a day after Trump said Powell’s termination “cannot come fast enough” as he called for the Fed to cut interest rates.

Trading was thin with most European markets and those in Australia and Hong Kong closed for Easter Monday. Most markets globally were closed on Friday for a holiday.

US stocks suffered steep losses on Monday after Trump’s social media post about Powell, with all three major indexes down more than 2%, and steep losses in the “Magnificent Seven” group of megacap growth stocks weighing heaviest on the tech-heavy Nasdaq.

“Powell does not report directly to Trump, so (Trump) cannot actually fire him. He can only be removed from office under certain procedures, which one would think have a higher barrier,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. “But can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure, he could.”

Against the Swiss franc, the dollar sank more than 1.5% to a 10-year trough of 0.8063, while the euro peaked at USD 1.1535, its highest since November 2021.

The dollar also hit a seven-month low against the yen, and was last at 140.66. CFTC data showed net-long positions on the Japanese yen hit a record high for the week ended April 15.

“If the central bank’s dual mandate — preserving price stability and fostering full employment — is diluted with a new set of objectives defined by the White House, policymakers could find themselves unable to tighten policy dramatically in the face of a sudden increase in prices,” said Karl Schamotta, chief market strategist at Corpay in Toronto, in a research note.

Sterling rose to its highest since September at USD 1.34, while the Australian dollar scaled a four-month high of USD 0.6430. The New Zealand dollar reclaimed the USD 0.6000 level for the first time in more than five months.

“It’s really a buffet for any dollar bear… from the heightened uncertainty around the self-harm from tariffs to the loss of faith even prior to the Powell news,” Varathan said.

Trump’s sweeping tariffs and uncertainty over his trade policies have sent global markets into a tailspin and darkened the outlook for the world’s largest economy, in turn weakening the dollar as investors pull money out of US assets.

Elsewhere, the onshore yuan rose to a two-week high before paring some of those gains. Its offshore counterpart was last at 7.2931 per dollar.

China on Monday kept its benchmark lending rates steady for the sixth successive month, matching expectations. But markets are betting on more stimulus being rolled out soon in the face of the escalating China-US trade war.

(Reporting by Hannah Lang in New York and Rae Wee in Singapore; Editing by Marguerita Choy and Jane Merriman)

 

ORLANDO, Florida – If US President Donald Trump wants a weaker dollar, threatening to fire Federal Reserve Chair Jerome Powell is a sure-fire way of getting it. But rarely in markets, economics and policymaking has the phrase “be careful what you wish for” ever been more apt.

Trump’s frustration with Powell for not lowering interest rates goes back to his first term in the White House, but his latest verbal attacks mark an escalation that could quickly turn a dollar slump into a potentially catastrophic rout.

That’s not hyperbole. The dollar is down 9% this year and has lost almost 6% of its value this month alone, a slide that accelerated when Trump’s “Liberation Day” tariffs threw markets into a downward spiral of uncertainty and confusion.

The dollar’s decline this year has wiped out all of last year’s gains, which is quite a feat considering the tsunami of capital inflows as investors around the world plowed trillions into Wall Street on the back of the “US exceptionalism” story.

Measured against a basket of major currencies, the dollar is on track for its steepest monthly decline since the Global Financial Crisis of 2007-09, and its eighth biggest since the era of free-floating exchange rates was introduced more than 50 years ago.

Excluding the GFC, the last time the dollar fell this much in a calendar month was in 1985, just before five countries agreed to weaken what was legitimately an overvalued dollar via the famed “Plaza Accord” in September of that year.

The scale of dollar selling underway now is historic, and worryingly for policymakers, it appears to be rooted in concern about the direction and credibility of US policymaking.

There’s almost nothing that could undermine credibility in a country’s economic policymaking – and its currency – more than forcibly removing the head of the central bank: Even in the United States and even the dollar. Or perhaps, especially in the US and especially the dollar, because of the outsized role both play in the global financial system.

Former Boston Fed President Eric Rosengren put in plainly on Monday when he wrote on the social media platform X: “Unless the goal is to make the US trade like a third-world country, threatening federal reserve independence only makes the US less attractive to foreign investors.”

POLYMARKET ODDS

Of course, the doomsday scenario may be avoided. Trump could back down or soften his stance, Powell might decide to voluntarily step down to limit the damage, or markets could take the view that his replacement may not be so bad after all. But right now, there’s little to suggest any of those scenarios will play out.

In the near term, Powell’s exit would probably prompt an immediate, dovish repricing of the Fed’s rate outlook.

Traders currently expect the Fed to cut interest rates by 100 basis points this year to 3.25-3.50%, but that’s with Powell attempting to balance growth concerns with any rising price pressures. A Fed more in tune with Trump’s thinking would tilt that balance in the direction of more easing.

But that’s only part of the story because continued dollar weakness wouldn’t be welcomed by other countries, whose currencies would be rising in value against the greenback. Moreover, shattered faith in the dollar would risk unleashing tremors that could rip through global markets in unexpected ways. Official intervention would surely come at some point.

But would it succeed?

“Fending off a speculative attack (on the dollar) would be challenging,” warns economist Phil Suttle, even for the Fed, as US rates would probably be falling in such a fevered “risk off” environment.

Redrawing the world’s economic architecture is one of Trump’s economic goals. Political interference in the central bank, unmooring inflation expectations and torpedoing the world’s faith in the dollar would certainly do that, but it’s a high price to pay.

Online prediction market Polymarket is currently attaching a 19% chance to Powell getting fired by the end of this year, up from around 15%, where it has hovered for most of this year, but down from as high as 23% last week. Unless Trump has a sudden change of heart, this probability – and pressure on the dollar – is likely to rise.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Aurora Ellis)