NEW YORK: The dollar fell on Wednesday after US President Donald Trump called on Federal Reserve Governor Lisa Cook to resign, as investors also waited on a speech by Fed Chair Jerome Powell on Friday for clues on interest rate policy.
Trump cited a call by the head of the US Federal Housing Finance Agency urging the Department of Justice to probe Cook over alleged mortgage fraud. Spokespeople for Cook and the Fed did not immediately respond to requests for comment.
“The market has voted with its pocketbook that it doesn’t like when the president interferes with the Federal Reserve,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
Trump has been critical of Powell for being to slow to cut rates, and traders expect he will replace the Fed Chair with a more dovish appointment when his term ends in May.
But Powell may stay on the board of governors, which would limit how many appointments Trump may make and could crimp plans to form a more dovish composition of policymakers.
“This is just a thinly veiled attempt to get control of the Federal Reserve, because if Powell doesn’t step down as Governor when his chair ends, Trump’s only appointment is the Kugler seat that he gave to Miran temporarily,” Chandler said.
Trump earlier this month said he would nominate Council of Economic Advisers Chairman Stephen Miran to serve out the final few months of a vacant Fed seat after Fed Governor Adriana Kugler unexpectedly resigned.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last down 0.16% on the day at 98.16, with the euro up 0.15% at $1.1664.
The Japanese yen strengthened 0.21% against the greenback to 147.37 per dollar.
Traders are focused this week on whether Powell will push back against market expectations for a rate cut at the Fed’s September 16-17 meeting when he speaks at the US central bank’s Jackson Hole meeting on Friday, following a weak jobs report for July.
Powell has said he is reluctant to cut rates on expectations that Trump’s tariff policies will increase inflation this summer.
Consumer price inflation data for July showed limited impact from tariffs but hotter than expected producer price inflation has tempered expectations for how many cuts are likely this year.
Fed funds futures traders are currently pricing in 85% odds of a cut next month, and 54 basis points of cuts by year-end.
Later on Wednesday, the Fed will issue the minutes of its July 29–30 meeting, when it held rates steady, although they may offer limited insight as the meeting came before the weak jobs numbers.
The New Zealand dollar dropped 1.04% to $0.5831, a four month low, after the country’s central bank cut its policy rate by 25 basis points to a three-year low of 3.00% and flagged further reductions in coming months as policymakers warned of domestic and global headwinds to growth.
The Swedish crown strengthened 0.1% to 9.59 after Sweden’s central bank held its key interest rate at 2.00% as expected.
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