The dollar lingers close to a three-year low as Trump’s criticisms of the Fed chief unsettle traders

On Tuesday, the dollar hovered close to its lowest point in three years, as President Donald Trump’s persistent criticisms of the Federal Reserve chairman continued to undermine investor confidence in the U.S. economy.

The U.S. currency weakened, nearing the decade-low it hit the day before against the Swiss franc, and remained close to a 3-1/2-year low against the euro.

On Monday, Trump intensified his criticism of Fed chief Jerome Powell in a post on Truth Social, labeling him a “major loser” and insisting that he lower interest rates “NOW” to avoid an economic slowdown.

On Friday, White House economic adviser Kevin Hassett stated that the president and his team were still examining the possibility of firing Powell, following Trump’s remark the previous day that Powell’s termination “cannot come fast enough”.

Trump’s attack follows Powell’s statement last week indicating that the central bank can take its time in determining policy, emphasizing that rates should remain unchanged until there is more clarity on U.S. tariff plans and their potential to drive inflation higher consistently.

“There’s a significant impasse” between Trump and Powell, raising “worries that action may be taken to replace Powell, which could trigger a genuine panic in the dollar,” stated Eric Kuby, chief investment officer at North Star Investment Management.

Furthermore, regarding trade, Kuby stated that “every day without any deals being made to offer relief generates ongoing anxiety” about the potential harmful impact of Trump’s policies on the economy in their present state.

On Monday, China accused Washington of misusing tariffs and cautioned nations against pursuing a wider economic agreement with the United States that could come at its detriment, intensifying its rhetoric in the escalating trade conflict between the two largest economies in the world.

The dollar remained stable at 0.8095 Swiss franc, close to the decade-low of 0.8042 attained in the prior session.

The U.S. currency purchased 140.99 yen, remaining near Monday’s seven-month low of 140.48.

The euro remained relatively stable at $1.1502, following a rise to $1.1573 on Monday, marking its highest point since November 2021.

Sterling remained steady at $1.3376 after reaching a peak of $1.3421 for the first time since September at the beginning of the week.

Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, stated, “The longer the speculation about the independence of U.S. monetary policy continues, the longer the USD is at risk of falling.”

“Another sell-off in the U.S. government bond market or U.S. equity market might be necessary to prompt President Trump to hold back on such comments.”

The U.S. dollar index, measured against six major peers, was at 98.454, having dropped to a low of 97.923 in the previous session, a level not observed since March 2022.

On Monday, the risk-sensitive Australian dollar rose to a four-month high of $0.6436 and stayed near that level in the most recent session, trading at $0.6414.