Reasons for the Dollar’s Decline to a 3-Year Low on Monday
Just moments ago, the U.S. dollar fell to its lowest point in three years, stirring concerns among investors regarding President Donald Trump’s proposals to limit the autonomy of the Federal Reserve.
In early Monday trading, the U.S. Dollar Index (DXY) dropped to 97.92, marking its lowest level since March 2022. Since early April, the benchmark dollar index has seen a decline of roughly 5%, in part due to President Trump’s controversial announcement of significant tariffs affecting nearly every country.
Investor focus on Wall Street shifted to Trump’s contentious relationship with Federal Reserve Chair Jerome Powell, whom the President has criticized for delaying interest rate cuts. Recently, Trump suggested that Powell’s removal was overdue, as the White House’s economic advisor, Kevin Hassett, indicated that the President was exploring options to dismiss Powell, who has held the position since 2018.
The ongoing debate regarding the Fed’s independence adds to a list of Washington issues that have unsettled investors. A recent wave of stock sell-offs, rising Treasury yields, and the dollar’s drop followed the announcement of Trump’s “reciprocal tariffs.” Analysts have raised alarms over the fact that market disruptions typically drive investors toward traditional safe havens like Treasurys and the dollar, which seem to be losing their allure. Former Treasury Secretary Janet Yellen remarked that the trend indicates a growing disbelief in dollar-based assets.
In contrast, gold emerged as a popular safe haven, rising almost 30% this year and reaching an all-time high of over $3,440 an ounce on Monday, signaling investors’ shift in preference.
The tension between Trump and Powell could have significant repercussions for the global economy. UBS Global Wealth Management’s Chief Economist Paul Donovan stated that the recent moderation in inflation may have stemmed from a trend favoring central bank independence. Donovan emphasized the necessity for trust in the central bank, noting that while it takes years to build, it can be lost overnight.
On social media, President Trump reiterated his discontent with Powell, claiming that inflation remains non-existent and demanded immediate interest rate cuts. The next interest-rate decision by the Federal Reserve is scheduled for May 7, with officials suggesting a careful approach regarding cuts, pending the economic impacts of the tariffs.
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