The dollar weakened on Wednesday (August 20th) after US President Donald Trump called for Federal Reserve Chairwoman Lisa Cook to resign. Investors are also awaiting a speech by Fed Chairwoman Jerome Powell on Friday for clues on interest rate policy.

Trump cited calls from the head of the US Federal Housing Finance Administration urging the Justice Department to investigate Cook for alleged mortgage fraud. Spokespeople for Cook and the Fed did not immediately respond to requests for comment.

"The market has made it clear in its conscience that it doesn't like it when the president interferes with the Fed," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

Trump has criticized Powell for being too slow in cutting interest rates, and traders expect him to replace the Fed Chairwoman with a more dovish appointment when his term ends in May.

However, Powell is likely to remain on the board of governors, which would limit the number of appointments Trump can make and could hinder plans to create a more dovish policymaking lineup. "This is just a thinly veiled attempt to control the Federal Reserve, because if Powell doesn't step down as Chairman after his term ends, Trump's only appointment will be Kugler's seat, which he gave to Miran on an interim basis," Chandler said.

Trump said earlier this month he would nominate Council of Economic Advisers Chairman Stephen Miran to fill the final few months of the Fed seat vacated by Fed Governor Adriana Kugler's abrupt resignation. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last down 0.16% on the day at 98.16, with the euro up 0.15% at $1.1664.

The Japanese yen strengthened 0.21% against the greenback to 147.37 per dollar.

Traders this week are focused on whether Powell will defy market expectations for a rate cut at the Fed's September 16-17 meeting when he speaks at the US central bank's Jackson Hole meeting on Friday, following the weak July jobs report. Powell said he was reluctant to cut interest rates due to expectations that Trump's tariff policies would raise inflation this summer.

July consumer price inflation data showed a limited impact from the tariffs, but higher-than-expected producer price inflation has tempered expectations about how many cuts might come this year. Fed fund futures traders currently price in an 85% chance of a rate cut next month, and a 54 basis point cut by the end of the year.

The minutes will be released on Wednesday, July 29-30, when the Fed held interest rates unchanged, although the minutes may offer limited insight as they were held before weak employment data. The New Zealand dollar weakened 1.04% to $0.5831, its lowest level in four months, after the central bank cut its benchmark interest rate by 25 basis points to a three-year low of 3.00% and signaled further cuts in the coming months as policymakers warned of domestic and global headwinds to growth. The Swedish krona strengthened 0.1% to 9.59 after the Swedish central bank kept its benchmark interest rate at 2.00% as expected.

Sterling weakened 0.07% to $1.3481 after UK inflation hit an 18-month high in July, but this is not seen as influencing Bank of England policy. "The BoE is more concerned about food inflation, which didn't change much in today's release," said ING head of research Chris Turner. In cryptocurrencies, bitcoin weakened 0.22% to $113,324. (alg)

Source: Reuters