Trump’s Rate Cut Advocacy and Powell Disagreement Weaken Dollar
Investing.com – On Thursday, most Asian currencies saw gains, while the U.S. dollar fell to its lowest point in over three years. This decline was driven by U.S. President Donald Trump’s ongoing calls for interest rate cuts and his public criticism of Federal Reserve Chairman Jerome Powell. A report from the Wall Street Journal suggesting that Trump might consider appointing Powell’s successor earlier than usual further pressured the dollar. Additionally, expectations of a possible rate cut by the Federal Reserve as early as July contributed to the dollar’s decline.
Regional risk appetite remained positive, bolstered by the continued U.S.-brokered ceasefire between Israel and Iran. Trump also hinted at potential nuclear discussions with Iran in the upcoming week.
The dollar index and dollar index futures both fell by 0.2% to 0.3% during the Asian trading session, reaching their lowest levels since March 2022. This week, the dollar experienced significant losses, with the U.S.-brokered ceasefire reducing demand for the dollar as a safe haven.
The dollar’s downward trajectory intensified after the Wall Street Journal reported that Trump is contemplating an early appointment for Powell’s successor in a move to weaken the current Fed Chair and potentially alter market expectations for further rate cuts.
This report emerged shortly after Trump expressed dissatisfaction with Powell, reiterating his call for more aggressive rate cuts. Earlier in the week, Trump argued that U.S. interest rates should be at least two to three percentage points lower, warning that higher rates could harm economic growth. Powell, however, has maintained a cautious stance regarding rate cuts and has highlighted the inflationary risks posed by Trump’s tariffs, which could delay the central bank’s actions. Powell also stated his intention to serve the remainder of his term, which concludes in May 2026.
Asian Currencies Gain Ground, Chinese Yuan Strengthens on Stimulus Expectations
Asian currencies benefited from the dollar’s weakness, with improved risk appetite encouraging fund inflows into regional currencies. The Chinese yuan’s USDCNY pair fell by 0.3%, reaching its strongest level against the dollar in seven months. The yuan’s strength was supported by announcements from Chinese officials promising forthcoming stimulus measures. Local media reported that China’s National Development and Reform Commission plans to launch a new package of consumer incentives and subsidies in July, potentially boosting domestic spending.
The Taiwan dollar emerged as a standout performer, with the USDTWD pair declining by 1%. Other Asian currencies also experienced gains; the Japanese yen USDJPY pair fell by 0.3% as attention shifted to the upcoming Tokyo inflation data, which could influence the Bank of Japan’s rate hike plans amid growing price pressures and hawkish sentiments from BOJ officials.
The South Korean won USDKRW decreased by 0.3%, while the Australian dollar AUDUSD rose by 0.4%. Additionally, the Singapore dollar USDSGD pair dropped by 0.3%, and the Indian rupee USDINR pair slipped by 0.2%.
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