Dollar Plunges to Three-Year Low Amid Fed Shake-Up Fears and Trade Uncertainty

The U.S. dollar fell sharply on Monday, hitting multi-year lows against major currencies as fears mounted over the independence of the Federal Reserve and escalating trade tensions. Investor sentiment weakened after President Donald Trump criticized Fed Chair Jerome Powell, saying his removal "cannot come fast enough." White House adviser Kevin Hassett added fuel to the fire by confirming the administration is reviewing the possibility of firing Powell.

The euro surged to a three-year high at $1.1476, while the greenback tumbled 0.58% to 141.40 yen and 0.9% against the Swiss franc to 0.8119. Sterling rose to its highest level since October at $1.3339, and the Australian dollar touched a two-month peak at $0.6396. The dollar index, which tracks the greenback against a basket of currencies, dropped to a three-year low of 98.623.

Markets were thinner than usual with holidays in Australia and Hong Kong, but the dollar weakness was evident across the board. Mizuho’s Vishnu Varathan noted that while Trump may not have the authority to directly remove Powell, merely casting doubt on Fed independence could have lasting market repercussions. “It’s about perception — not necessarily action,” he said.

Trade concerns also weighed heavily. Trump’s tariff policies and uncertainty over U.S.-China relations continue to pressure global markets and U.S. asset flows, amplifying dollar weakness. The New Zealand dollar rose 0.46% to $0.5964, while the offshore Chinese yuan appreciated slightly to 7.2966 per dollar as markets await China’s rate decision and potential stimulus amid ongoing trade friction.

The dollar’s sharp decline reflects a broader erosion of confidence in U.S. monetary policy and trade strategy, with investors shifting toward safer, more stable assets.