Dollar falls as Trump move to fire Fed guv spooks investors

The dollar stumbled against major currencies on Tuesday as US President Donald Trump’s unprecedented move to fire Federal Reserve governor Lisa Cook renewed concerns over the central bank’s independence.

The euro and sterling were up about 0.3 per cent against the dollar at $1.1654 and $1.3491, respectively. Against the Japanese yen, the dollar was down 0.2 per cent to 147.41 yen and it dipped against the Swiss-franc as well. Trump said he was removing Cook over alleged improprieties in obtaining mortgage loans, a step that could test the boundaries of presidential power over the Fed. In response, Cook said Trump had no authority to fire her from the central bank, and she would not resign. “Challenges to Fed independence pose clear downside risks to the Dollar in our view, owing in this case to both concerns around US institutions, and to the read-through to lower front-end US yields,” analysts at Goldman Sachs said in a note.

Trump’s announcement surprised markets but the reaction was relatively muted with investors caught between the concerns over politicisation of policy and the payoffs for markets.