The US dollar has fallen to its lowest levels in over three years, as investors worry about a potential erosion of Federal Reserve independence. President Donald Trump’s attacks on Fed Chair Jerome Powell have sparked concerns that the central bank may cut interest rates, further weakening the dollar.
Inflation worries and Middle East tensions had briefly lifted the dollar last week, but it has since fallen back to multi-year lows against other major currencies. The dollar is down 10% so far this year, with some analysts predicting a further decline if rate cuts become imminent.
“Being short the dollar in this environment where there’s an erosion of institutions,” said Kaspar Hense, a senior portfolio manager at RBC BlueBay Asset Management. “This is not currently priced-in and would still move markets if someone like Hassett or Bessent got the job.”
Trump has reportedly identified former Fed Governor Kevin Warsh, National Economic Council head Kevin Hassett, current Fed Governor Christopher Waller, and Treasury Secretary Scott Bessent as potential successors to Powell.
The dollar’s decline is also linked to concerns over US institutions’ credibility, with investors wary of President Trump’s attacks on the Fed. A survey by OMFIF showed that 70% of central bank reserve managers believed the US political environment discouraged them from investing in the dollar.
European Central Bank supervisors are also assessing their need for dollars in times of stress, as markets game out scenarios where they may not be able to tap the Fed under a Trump administration.
Source: https://www.reuters.com/business/finance/no-love-dollar-markets-fret-about-fed-independence-2025-06-26