Ankur Banerjee
SINGAPORE (Reuters) – The US dollar has risen sharply, with trade deal optimism beating the sentiment of President Donald Trump on Wednesday saving investors from the threat of firing Federal Reserve Chairman Jerome Powell.
This week’s market has been addressing the notion that since the president took office in January, the Fed’s independence could be threatened after Trump’s repeated attacks on Powell, followed by Trump’s repeated attacks on Powell.
However, late Tuesday, Trump appeared to have retreated.
“I’m not going to fire him,” Trump told reporters in the Oval Office on Tuesday. “I hope he’ll be a little more proactive in terms of his idea of lowering interest rates.”
So, at the beginning of the Asian time trading day, the dollar rose rapidly, but stabilized in the morning.
The dollar rose more than 1% against the yen in early trading, and was slightly stronger at 141.77. Against the Swiss franc, the dollar was 0.29% stronger at 0.8216, jumping above 1% of the session.
The euro was $1.14, while Sterling eased 0.17% at $1.3311.
The dollar was trading near the Swiss franc on Tuesday, a few years’ lows and Swiss franc, but reached seven months’ high as investors dumped US assets and worried about trade tensions and Trump’s attack on the Fed.
Prashant Newnaha, a senior Asia-Pacific fare strategist at TD Securities, said it is unlikely that President Trump will be able to remove Powell from office, but his comments on the Fed Chairman and China are “music to the ears of the market.”
“The market recognizes that managers cannot afford to crash asset prices, and this is drawn to dip buyers,” Newnach said. “For now, we see Trump as supporting the market and we believe he is providing policy leverage.”
Also, supporting Wednesday’s sentiment was comments from Trump and U.S. Treasury Secretary Scott Bescent, suggesting that trade tensions between the US and China could potentially lead to a breakthrough, suggesting that a trade deal with China could “significantly” cut tariffs.
“Trade is a bigger story here, as how tariffs are carried out determines where interest rates are headed in the US economy and therefore in the US.”
“The dollar has been showing tentative signs of the trough since last week, but if Bescent is right to consider trade tensions going backwards, we can prove that the dollar bull is the trigger we’re looking for,” Simpson said.
