NEW YORK (BLOOMBERG) - The US dollar dropped on Monday (March 4) after US President Donald Trump warned against excessive strength in the greenback, and analysts warned that his continued attacks on the Federal Reserve could put the currency under pressure in the longer term. Signs that a trade deal between the US and China is within reach are also adding to pressure on the US currency.
The US dollar fell against both the euro and yen early Monday after Mr Trump said on Saturday that the US dollar's strength is hurting America's ability to do business with other nations. He also assailed Federal Reserve Chairman Jerome Powell as someone who "likes raising interest rates" and took a jab at "quantitative tightening", the central bank's ongoing balance-sheet reduction.
It's not the first time Mr Trump has attacked Fed policy, but these comments come even after the central bank has already signalled a likely pause in interest-rate increases and a potential end to its balance-sheet runoff.
While the market is "getting used to these kind of comments" and "any effects on the dollar should be limited and short-lived," the question of the Fed and its independence is of concern, according to Robert Bergqvist, chief economist at SEB AB. "You could now get the impression that the Fed is listening too much to the White House. This should have long-term negative effects on the dollar."
The US dollar fell as much as 0.2 per cent against the yen to 111.78 and as much as 0.3 per cent versus the euro to US$1.1382.
News that most or all US tariffs on China are likely to be lifted as part of a trade deal also boosted trade-sensitive currencies against the US unit in early Asian trading. The Australian dollar rose as much as 0.5 per cent to 71.17 US cents and the kiwi climbed 0.4 per cent to 68.32 US cents.