The US dollar (USD) exchange rate experienced significant pressure in today's trading, following market concerns about the independence of the Federal Reserve (The Fed), the United States' central bank. News of President Trump's plan to dismiss Fed Chair Lisa Cook sparked widespread uncertainty among market participants.

Reasons for the Dollar's Decline

Political intervention in the Fed is considered to diminish the central bank's credibility and independence in monetary policymaking. This has the potential to impact investor confidence in the Fed's ability to control inflation and maintain economic stability.

As a result, speculation has arisen that the Fed may be inclined to adopt a dovish stance by cutting interest rates more quickly and aggressively than previously expected. Bond market data supports this sentiment, with the two-year US Treasury yield falling to its lowest level since May 2025, reflecting expectations of lower interest rates.

Impact on the Market

The decline in bond yields makes the dollar less attractive to foreign investors, who typically seek higher returns from dollar-based assets. Furthermore, political uncertainty has fueled risk-off sentiment in the market, prompting investors to turn to safe-haven assets such as gold and the Japanese yen.

The US dollar index (DXY) weakened by around 0.4% in the latest trading session, down from its peak earlier in the week. Major currencies such as the euro and yen managed to strengthen against the dollar, with the euro gaining 0.3% and the yen strengthening 0.5%.

Source: Newsmaker.id