On Monday, January 12, the American dollar showed its strongest decline in three weeks. The reason was an unprecedented legal conflict between the US presidential administration and the Federal Reserve System, which increased investors' fears about the central bank's loss of independence. This was reported by Bloomberg, writes UNN.
Details
According to Bloomberg, the spot dollar index in Asian trading fell by 0.2%, which is the most significant decline since late December. This happened after Fed Chairman Jerome Powell confirmed in a Sunday video address that the Department of Justice had received grand jury subpoenas.
Analysts' reaction and risks for the currency
Fiona Lim, senior currency strategist at Malayan Banking Bhd, notes that President Trump's desire to establish full control over the Fed seriously undermines confidence in the dollar as a global reserve currency.
The White House's determination to lower borrowing costs at any price indicates that the next head of the Fed (Powell's term ends in May) could be a politically loyal figure, which poses direct risks to the stability of the American currency.
Currently, markets are in a state of increased volatility, awaiting the reaction of Congress and possible new statements from the Department of Justice, headed by Trump supporter Jeanine Pirro.