SINGAPORE, April 23 — The US dollar jumped broadly against major currencies today as investors heaved a sigh of relief after President Donald Trump backed away from threats of firing Federal Reserve Chair Jerome Powell following his recent attacks.
The markets this week have been grappling with the notion that the Fed's independence could be under threat after an Easter holiday weekend featuring repeated attacks by Trump on Powell for not cutting rates since the president resumed office in January.
But late yesterday Trump appeared to back down.
"I have no intention of firing him," Trump told reporters in the Oval Office yesterday. "I would like to see him be a little more active in terms of his idea to lower interest rates."
That left the dollar soaring today in Asian hours, rising 0.75 per cent against the yen to 142.68 and 0.7 per cent against the Swiss franc to 0.8249. The euro was 0.49 per cent lower at US$1.1363.
The dollar had been trading near multi-year lows versus the euro and the Swiss franc yesterday, while the yen hit a seven month high as investors dumped US assets, worried by trade tensions and Trump's attacks on the Fed.
Also aiding sentiment today were comments from Trump and US Treasury Secretary Scott Bessent that suggested that there could be a de-escalation in US-China trade tensions and any trade deal with China could "substantially" cut tariffs.
"Trump's apparent U-turn must come as a relief ... which has helped support the US dollar on bets he (Powell) won't be replaced with someone more dovish," said Matt Simpson, senior market analyst at City Index.
"But trade is the bigger story here — as how tariffs play out will dictate where the US economy, and therefore US interest rates, are headed."
Bessent said neither side sees the status quo as sustainable, adding that the Trump administration's goal was not to decouple the world's two largest economies, according to a person who heard his presentation to investors at a JP Morgan conference.
Meanwhile, Trump expressed optimism that a trade deal with China could "substantially" cut tariffs. He said a deal would lower tariffs on Chinese goods, suggesting that a final deal will not "be anywhere near" current tariff rates. But he added that "it won't be zero".
Chris Weston, head of research at Pepperstone, said Trump's stance on Powell should go some way to allying fears of a major policy mistake in pursuing the removal of the Fed chair.
"Markets become ever more conditioned to the President shooting from the hip and then reversing the stance like it was never a big issue."
— Reuters
