The Blubber

The U.S. dollar hovered near multi-year lows against the euro and Swiss franc on Tuesday, as President Donald Trump's intensified criticism of the Federal Reserve stirred concerns over the central bank’s independence.

Analysts noted the dollar remained particularly vulnerable amid rising apprehension over the Trump administration’s tariff policies, which markets fear could ignite a global trade war.

Concerns over the Fed’s autonomy have also put pressure on the dollar’s status as a reserve currency, with analysts warning of potential divestment from U.S. assets due to perceived overexposure.

The dollar's losses deepened after Thailand’s prime minister announced a delay in scheduled trade negotiations with Washington, originally set to begin Wednesday.

Trump escalated his attacks on Fed Chair Jerome Powell on Monday, calling him a “major loser” and demanding immediate interest rate cuts to prevent an economic slowdown.

“Firing Jerome Powell would be disastrous for the dollar and for broader confidence in U.S. financial markets,” said Adam Button, chief currency analyst at ForexLive. “The market is hoping for cooler heads to prevail so the U.S. economy can keep expanding.”

Last Friday, White House economic adviser Kevin Hassett confirmed that the president’s team was still examining legal options regarding Powell’s potential removal. Powell, for his part, reiterated last week that the Fed could afford to take a patient approach to policy setting.

Money markets currently price in less than a 10% chance of a rate cut in May, with around 90 basis points in cuts expected by year-end — little changed from the previous week.

“The worst-case scenario for the dollar right now would be Powell giving in and issuing an emergency rate cut, although that remains unlikely,” said Francesco Pesole, a strategist at ING.

Barclays raised its euro/dollar forecast to $1.15, reflecting its view that Powell’s removal remains improbable. However, the bank cautioned that more adjustments could be needed if the situation escalates.

Meanwhile, China accused the U.S. on Monday of abusing its tariff powers and warned other nations against cutting economic deals with Washington at Beijing’s expense.

The dollar edged down 0.03% to 140.820 yen after slipping below the psychologically important 140 level for the first time since mid-September. Against the Swiss franc, the dollar rose 0.57% to 0.8138, still hovering close to the decade-low of 0.8042 hit in the prior session.

The euro fell 0.38% to $1.1467 after reaching $1.1573 on Monday — its highest level since November 2021.

“While both the yen and euro have gained around 12% against the dollar, the yen’s rally looks more fragile,” said Shusuke Yamada, a forex strategist at BofA Japan. He pointed to increased speculative positioning and mounting attention on a possible U.S.-Japan currency agreement, while structural outflows from Japan have faded from view.

Although some analysts believe Washington may push Tokyo to help strengthen the yen, Japan appears unlikely to take direct action.

The U.S. dollar index, which tracks the dollar against six major peers, rose 0.256% to 98.599, rebounding from Monday’s low of 97.923 — a level not seen since March 2022.