The U.S. dollar reached its lowest value since multiple years on Thursday because investors became concerned about Federal Reserve independence loss and rising political demands for interest rate reductions.
The dollar value decreased further because investors reacted to President Donald Trump’s negative comments about Fed Chair Jerome Powell and reports about potential replacements for Powell. The administration considers Kevin Warsh and Kevin Hassett and Christopher Waller and Treasury Secretary Scott Bessent as leading candidates for the position.
The dollar value declined further because market participants bet on Federal Reserve interest rate cuts. Kaspar Hense from RBC BlueBay Asset Management stated that the current institutional breakdown makes them short the dollar.
The Federal Reserve faces intense scrutiny about its upcoming policy decision because trade deals must be finalized by July 9. Fed Governor Michelle Bowman expressed dovish expectations through her comments about potential rate cuts during the previous week.
The dollar experienced a brief increase from safe-haven flows because of Middle East tensions but this support did not last. The dollar’s decline has intensified doubts about inflation control and policy stability and the Federal Reserve’s ability to operate independently.
Currency strategists predict that the dollar will keep falling because investors believe future Fed leaders will make decisions based on political considerations instead of economic principles.
