Dollar hits three-year low as Trump attacks threaten Fed's independence

By Hannah Lang

NEW YORK (Reuters) -The dollar tumbled on Monday to its lowest level in three years as investor confidence in the U.S. economy took another hit over President Donald Trump's attacks on the Federal Reserve chairman, potentially putting the central bank's independence under threat.

Trump ramped up his criticism of Fed Chair Jerome Powell on Monday via social media, calling him a "major loser" and demanding that he lower interest rates immediately.

Against a basket of currencies, the dollar slid as low as 97.923 on Monday, its lowest since March 2022. The currency also fell to a decade-low against the Swiss franc, while the euro broke above $1.15.

White House economic adviser Kevin Hassett said on Friday that the president and his team were continuing to study whether they could fire Powell, just a day after Trump said Powell's termination "cannot come fast enough" as he called for the Fed to cut interest rates.

Trading was thin with most European markets and those in Australia and Hong Kong closed for Easter Monday. Most markets globally were closed on Friday for a holiday.

U.S. stocks suffered steep losses on Monday after Trump's social media post about Powell, with all three major indexes down more than 2%, and steep losses in the "Magnificent Seven" group of megacap growth stocks weighing heaviest on the tech-heavy Nasdaq.

"Powell does not report directly to Trump, so (Trump) cannot actually fire him. He can only be removed from office under certain procedures, which one would think have a higher barrier," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. "But can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure, he could."

Against the Swiss franc, the dollar sank more than 1.5% to a 10-year trough of 0.8063, while the euro peaked at $1.1535, its highest since November 2021.

The dollar also hit a seven-month low against the yen, and was last at 140.66. CFTC data showed net-long positions on the Japanese yen hit a record high for the week ended April 15.

"If the central bank’s dual mandate -- preserving price stability and fostering full employment -- is diluted with a new set of objectives defined by the White House, policymakers could find themselves unable to tighten policy dramatically in the face of a sudden increase in prices," said Karl Schamotta, chief market strategist at Corpay in Toronto, in a research note.

Sterling rose to its highest since September at $1.34, while the Australian dollar scaled a four-month high of $0.6430. The New Zealand dollar reclaimed the $0.6000 level for the first time in more than five months.

"It's really a buffet for any dollar bear... from the heightened uncertainty around the self-harm from tariffs to the loss of faith even prior to the Powell news," Varathan said.

Trump's sweeping tariffs and uncertainty over his trade policies have sent global markets into a tailspin and darkened the outlook for the world's largest economy, in turn weakening the dollar as investors pull money out of U.S. assets.

Elsewhere, the onshore yuan rose to a two-week high before paring some of those gains. Its offshore counterpart was last at 7.2931 per dollar.

China on Monday kept its benchmark lending rates steady for the sixth successive month, matching expectations. But markets are betting on more stimulus being rolled out soon in the face of the escalating China-U.S. trade war.

(Reporting by Hannah Lang in New York and Rae Wee in Singapore; Editing by Marguerita Choy and Jane Merriman)