The US dollar experienced a significant drop on Monday, reaching its lowest point in three years. This decline was fueled by sharp criticisms from former President Donald Trump directed at Federal Reserve Chair Jerome Powell. Investors are now expressing concerns about the independence of the central bank, which has led to a lack of confidence in the US economy.
Dollar Index Decline
The dollar index, which gauges the performance of the greenback against various major currencies, plummeted to 97.923, marking its weakest position since March 2022. Notably, the dollar fell to a decade-low against the Swiss franc, and it also weakened against other key currencies, including the euro, yen, and British pound.
- Significant Currency Movements:
- The dollar dropped over 1.5% against the Swiss franc, reaching 0.8063.
- The euro surged to $1.1535, its highest since November 2021.
- Against the Japanese yen, the dollar fell to 140.66, a seven-month low.
- The British pound rose to $1.34, its peak since September.
Political Tensions
Trump’s criticisms were particularly pointed, as he labeled Powell a “major loser” and reiterated his call for immediate cuts to interest rates. This rhetoric intensified concerns about potential political interference in the Federal Reserve’s operations. Adding to this unease, White House economic adviser Kevin Hassett confirmed last Friday that the administration is considering legal measures to remove Powell, following Trump’s demand for swift action against the Fed Chair.
Impact on the Stock Market
The turmoil surrounding the dollar and the Federal Reserve led to a sharp downturn in the US stock market. The Dow Jones Industrial Average fell by 971.82 points, or 2.48%, closing at 38,170.41. The S&P 500 dropped 124.50 points, or 2.36%, finishing at 5,158.20, while the Nasdaq Composite lost 415.55 points, or 2.55%, to close at 15,870.90.
- Investor Behavior:
- Many investors shifted their funds into traditional safe-haven assets.
- Gold prices surged to new record highs, reflecting a growing sense of risk aversion in global markets.
- The Swiss franc also gained strength amid these developments.
Global Currency Trends
In addition to the dollar’s decline, the Chinese yuan also showed signs of strength, briefly reaching a two-week high before pulling back slightly. The offshore yuan was last recorded at 7.2931 per dollar.
The current situation illustrates the intricate relationship between political rhetoric and economic stability, as investors remain cautious amid ongoing uncertainties in the currency and stock markets. As this story unfolds, it will be essential to monitor how these dynamics affect future monetary policy and market confidence.
