The dollar slumped to its lowest level in three years after Donald Trump’s economic adviser suggested that the US president is seeking to oust the chairman of the Federal Reserve.
Mr Trump’s stinging rebukes of Jerome Powell caused the dollar to fall 1.1pc on Monday to a three-year low against a basket of six major currencies as investors worried over the independence of America’s central bank.
Every G10 currency gained against the dollar, with the pound rising 0.6pc to $1.33, while gold also rallied to a fresh record high, surging above $3,385 an ounce. Investors have been piling in to safe haven assets amid fears over the US president’s economic policy and ongoing uncertainty related to the trade war.
Meanwhile, the dollar tumbled to a 10-year low against the Swiss franc and the euro surged to $1.15 – its highest level since November 2021.
Mr Trump has repeatedly criticised Mr Powell, whom he appointed to chair the Fed in 2018, and suggested he should be removed for failing to lower interest rates more quickly.
Last week the president posted on social media that Powell’s “termination cannot come fast enough!” as he berated him for failing to cut interest rates.
On Friday, Kevin Hassett, Mr Trump’s economic adviser, said the president had been studying whether he could remove Mr Powell. This suggests Mr Trump is seeking to interfere with the independence of the central bank.
Vishnu Varathan, of investment bank Mizuho, said: “Powell does not report directly to Trump, so [Trump] cannot actually fire him. He can only be removed from office under certain procedures, which one would think have a higher barrier …
“But can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure he could.
“I would argue that they don’t even need to sack Powell immediately. You just need to create the perception that you could fundamentally change the view of an independent Fed.”
The dollar has suffered a mass sell-off in recent weeks, reversing a boost to the currency after Mr Trump won power and throwing its safe-haven status into turmoil.
On Monday, funds started selling the dollar as markets reopened following the Easter break.
The dollar’s decline marks the latest in market ructions after the the president’s “liberation day” tariffs sparked fears of a US recession and slowdown in the global economy.
Mr Trump has paused some of the higher tariffs – apart from a 10pc duty on all imports and a 145pc levy on China – and has threatened to reintroduce higher levies if countries refuse to negotiate.
On Sunday, Mr Trump said on social media “many world leaders” had asked for relief from tariffs and warned them to “right the wrongs of decades of abuse” by shifting manufacturing jobs back to the US.
