The dollar rose slightly on Wednesday morning as renewed investor concern about the Federal Reserve’s independence after President Donald Trump’s latest attempt to expand his power over it curbed gains in the U.S. currency.
Trump said on Monday he had decided to remove Lisa Cook from the Federal Reserve because of alleged irregularities in obtaining mortgages.
But Cook's lawyer later said she would file a lawsuit to overturn her dismissal, potentially triggering a long-running legal battle.
The dollar initially weakened due to these developments, but regained some strength later on Wednesday, rising 0.33% against the yen to 147.93, while the euro fell 0.24% to $1.1614. The British pound fell 0.23% to $1.3448, while the dollar index rose 0.2% to 98.47.
But gains in the U.S. currency have been limited, as Trump’s push to expand his influence over U.S. institutions and the course of monetary policy eroded investor confidence in the dollar’s dominance.
Neil Wilson, UK investment analyst at Saxo Markets, said Trump’s impeachment bid was "the latest round in the Federal Reserve’s wars and shows how the central bank is becoming increasingly politicized."
"It would be almost impossible for the next president of the House to do anything but implement Trump’s wishes. This would be negative for the dollar. The question for the markets now is September, but there is no doubt that we are seeing a regime shift we haven’t seen in decades."
Expectations of a faster and bigger cut in U.S. interest rates have affected the dollar, especially if Cook is replaced بشخص if she is removed from office بشخص by someone inclined toward monetary easing.
Trump has repeatedly called on the Federal Reserve to cut interest rates and threatened to fire its chairman, Jerome Powell, but recently reversed it.
For other currencies, the Australian dollar fell 0.16% to $0.6484, while the New Zealand dollar fell 0.27% to $0.5845.
