NEW YORK: The dollar fell on Monday after the US Department of Justice threatened to indict Federal Reserve Chair Jerome Powell over comments to Congress about a building renovation project, raising concerns about the independence of the US central bank and the long-term outlook for the currency.
Powell on Sunday said the Fed had received subpoenas from the Justice Department last week pertaining to remarks he made to Congress last summer over cost overruns for a USD2.5 billion building renovation project at the Fed’s headquarters complex in Washington.
He called the action a “pretext” to gain more influence over interest rates that US President Donald Trump wants cut dramatically. “This just ended the dollar’s New Year bounce,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
Trump will interview BlackRock’s chief bond investment manager Rick Rieder on Thursday, Fox Business Network reported on Monday. Rieder is among four finalists under consideration to succeed Powell.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.4 percent to 98.84, with the euro up 0.33 percent at USD1.1675.
The Swiss franc was among the best performers on Monday, with the dollar weakening 0.49 percent against the currency to 0.797. The greenback has been supported this year by a safe-haven bid on rising geopolitical concerns after the US took Venezuelan leader Nicolas Maduro into custody and as Trump expresses his desire for the US to acquire Greenland. Developments in Iran have also become a key focus. Iran said on Monday it is keeping communications open with the US as Trump weighed responses to a deadly crackdown on protests that have posed one of the biggest challenges to clerical rule since the 1979 Islamic Revolution.
The dollar was boosted on Friday after a solid US jobs report for December further reinforced expectations that the Fed will hold rates steady at its January 27-28 policy meeting. Fed funds futures pricing shows that the next rate cut is now seen as unlikely until June. The next major US economic focus will be the release on Tuesday of the consumer price inflation report for December.
Against the Japanese yen, the dollar strengthened 0.06 percent to 157.97. It earlier reached a one-year high of 158.19. “The problem is that last week Japan reported very weak, disappointingly so, labor earnings and the (Bank of Japan) had really tied the normalization of monetary policy to higher wages,” Chandler said.
“The market has pushed back just a little bit the timing of BOJ rate hikes.” Japan’s real wages fell in November at the fastest pace since last January, dragged down by a sharp drop in one-off bonus payments, preliminary government data showed on Thursday.
Meanwhile, the coalition partner of Japanese Prime Minister Sanae Takaichi’s party said on Sunday she might hold a snap election in February in a bid to capitalize on her strong public approval ratings since taking office in October. Takaichi’s policies, which favor big spending and a dovish BOJ stance, have weighed on the Japanese currency.
In cryptocurrencies, bitcoin gained 0.15 percent to USD90,791.
Comments
Comments are closed for this article.