The U.S. dollar faced a significant decline on Monday, hitting its lowest value in three years. This drop follows President Donald Trump’s intensified criticism of Federal Reserve Chairman Jerome Powell, raising concerns about the central bank’s autonomy. Trump’s social media remarks labeled Powell a "major loser" and urged immediate interest rate cuts, further shaking investor confidence in the U.S. economy.

Dollar’s Decline Against Major Currencies

On Monday, the dollar fell to 97.923 against a basket of currencies, marking its lowest point since March 2022. In addition, the dollar reached a ten-year low against the Swiss franc, while the euro surged past the $1.15 mark.

• Swiss Franc: Dollar dropped over 1.5% to 0.8063
• Euro: Increased to $1.1535, its highest since November 2021
• Yen: The dollar also hit a seven-month low against the yen

White House economic adviser Kevin Hassett indicated that the administration was contemplating the possibility of firing Powell, especially after Trump expressed his desire for Powell’s removal, stating that it “cannot come fast enough.” However, experts suggest that the president does not have the direct authority to dismiss Powell.

Implications for the Federal Reserve’s Independence

Vishnu Varathan, the head of macro research for Asia ex-Japan at Mizuho, explained that while Trump lacks the power to fire Powell directly, he could influence the perception of the Fed’s independence. This interference could have serious consequences for monetary policy, as the central bank’s dual mandate of maintaining price stability and ensuring full employment could be compromised.

Market Reactions and Currency Performance

In global trading, many European markets, as well as those in Australia and Hong Kong, were closed for Easter Monday, contributing to thinner trading volumes. Notably:

• The British pound rose to $1.34, its highest since September.
• The Australian dollar reached a four-month high at $0.6430.
• The New Zealand dollar reclaimed the $0.6000 level for the first time in over five months.

Karl Schamotta, chief market strategist at Corpay in Toronto, noted that if the Fed’s objectives are altered by the White House, it could hinder policymakers’ ability to respond effectively to rising inflation.

Global Economic Outlook

Trump’s aggressive trade policies and tariffs have created uncertainty in global markets, leading investors to withdraw from U.S. assets and further weakening the dollar. Meanwhile, the Chinese yuan experienced a brief surge to a two-week high before retracing some gains, as markets anticipate potential stimulus measures amid the ongoing trade tensions between China and the U.S.

In summary, the dollar’s decline reflects a complex interplay of political criticism, market sentiment, and global economic factors. Investors are closely watching the evolving dynamics as they navigate through this turbulent financial landscape.