Dollar Rebounds Amid Fed Nominee Speculation and Shutdown Concerns

Impact of Fed Nominee on Dollar Value

By Rocky Swift and Rae Wee

Market Reactions to Speculation

TOKYO, Jan 30 (Reuters) - The dollar rose on Friday, paring its weekly slide, after U.S. President Donald Trump said he would soon announce his nominee to head the Federal Reserve and on optimism Washington will avert a government shutdown.

Economic Indicators and Currency Trends

Trump said he intends to name his pick to replace Fed Chair Jerome Powell on Friday, following reports that former Fed Governor Kevin Warsh visited the White House. In Japan, data showed inflation slowed in Tokyo but matched the central bank's target.

Geopolitical Factors Influencing the Dollar

The greenback clawed back some losses from this week as tensions between Trump and Cuba, Iran, Venezuela, Greenland and Europe caused some investors to lose confidence in U.S. assets.

"The appointment of Warsh, if it's true, will be seen as someone who can, in a way, remain independent, and not someone seen as likely to be subservient to Trump's wishes," said Khoon Goh, head of Asia research for ANZ in Singapore.

"Any sensible market participant would not want to carry a big position into the weekend," he added. "So some of this could just be positioning lightening up. If you're short dollars, you've done well, take your chips off the table."

The dollar index, which measures the greenback against a basket of currencies, rose 0.4% to 96.60, trimming its weekly decline to 0.9%. Against the Swiss franc, the dollar strengthened 0.7% to 0.7699.

The euro sank 0.4% at $1.1916, while the yen weakened 0.42% to 153.77 per dollar. Sterling weakened 0.32% to $1.3759.

Warsh came to the White House for a meeting with Trump on Thursday, according to one source familiar with the matter. A second source said Warsh impressed Trump, who is vetting candidates to replace Powell when his term is up in May.

Meanwhile, the White House said that Trump signed an executive order that would impose tariffs on countries that provide oil to Cuba. Reports that Trump is considering strikes against Iran prompted a surge in oil prices and weighed on the dollar earlier.

The U.S. domestic front got a glimmer of hope after Trump endorsed a spending deal negotiated by U.S. Senate Republicans and Democrats that would stave off a government shutdown.

The dollar hit a four-year low earlier in the week after Trump seemed to shrug off the currency's weakness, recovering slightly after Treasury Secretary Scott Bessent said that Washington has a strong-dollar policy.

The greenback ended last week with its biggest fall since last April, driven partly by concerns about U.S. policy over Greenland.

The dollar found some support after the Fed held interest rates steady on Wednesday against the backdrop of what the Fed's Powell described as a solid economy and diminished risks to both inflation and employment.

The dollar slide has provided some reprieve for the battered yen.  The Japanese currency has tracked around the 152 to 154 per dollar range for most of this week thanks to talk of rate checks from the U.S. and Japan last week - a move often seen as a precursor to intervention.

Core consumer prices in Tokyo rose 2% in January from a year earlier, data showed on Friday, slowing from the previous month but matching the central bank's target.

The Australian dollar weakened 0.7% versus the greenback to $0.6996. New Zealand's kiwi weakened 0.5% to $0.6045.

Cryptocurrencies slumped sharply, with bitcoin sinking 3.3% to $81,619.01, and ether losing 3.4% to $2,719.87.

(Reporting by Rocky Swift in Tokyo; Editing by Sam Holmes)