Priyanka Tiwari
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Suspense crime, Digital Desk : The U.S. dollar has weakened in global currency markets following reports that former President Donald Trump is considering a move that would challenge the long-standing independence of the Federal Reserve.
The dollar's slide was triggered by news that Trump may announce his preferred candidate for the next Federal Reserve Chair before the November presidential election. This potential move is being interpreted by markets as a clear signal that, if elected, Trump intends to exert significant political pressure on the nation's central bank.
The Federal Reserve's independence from political influence is considered a cornerstone of U.S. economic stability. Its decisions on interest rates are meant to be based on economic data, not the political goals of the sitting president.
Trump has been a vocal critic of the current Fed Chair, Jerome Powell, repeatedly attacking him for keeping interest rates high. By floating the idea of an early nomination, Trump is signaling his intent to install a more "dovish" leader—one who would be more inclined to cut interest rates to stimulate the economy, a move that could be politically popular.
For currency traders, the prospect of lower future interest rates makes the dollar less attractive. Investors tend to seek out currencies that offer higher returns (interest). The expectation of future rate cuts, therefore, has an immediate negative impact on the dollar's value.
As the dollar slipped, other major currencies gained ground. The Japanese yen strengthened, and the euro held steady, reflecting the shift in sentiment away from the greenback. The move highlights how sensitive financial markets are to political developments and the perceived risks to institutional norms, especially in an election year.
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