On the morning of 26/8, the US dollar fell 0.3% against the Japanese yen, to 147.3 JPY per USD. The euro also rose 0.2% against the greenback, to 1.163 USD per EUR.
The Dollar Index, which measures the dollar's strength against a basket of six major currencies, also fell 0.3% to 98.1 points at one point. The previous day, this index had risen 0.7%.
The yield on 10-year US Treasury bonds increased by 1.8 basis points to 4.29%, and the 30-year yield reached 4.92% (equivalent to 3.2 basis points). This development signifies a decline in US government bond prices.
Financial markets fluctuated after the US president announced the dismissal of Fed Governor Lisa Cook over allegations of mortgage fraud. "Under the authority vested in me by Article II of the US Constitution and the Federal Reserve Act of 1913, as amended, I am removing you from office at the Federal Reserve Board of Governors, effective immediately," he wrote.
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Federal Reserve (Fed) Board Governor Lisa Cook. Photo: Reuters |
Federal Reserve (Fed) Board Governor Lisa Cook. Photo: Reuters
A few hours later, Cook responded to the press through her lawyer's office. She asserted that Trump "has no legal basis or authority" to remove her from the position to which former President Joe Biden appointed her in 2022. "I will continue to carry out my duties to support the US economy," she said.
The Board of Governors is the highest leadership body of the Fed, consisting of seven members nominated by the US president and requiring Senate confirmation. This group is responsible for setting monetary policy, banking supervision, and national financial stability.
Trump's move is considered unprecedented, further weakening confidence in US assets and the Fed's ability to operate independently. In recent months, the US president has repeatedly pressured the agency to cut interest rates.
"All of this, including import taxes, shows that the US is no longer reliable," said Bart Wakabayashi, director of State Street's Tokyo branch. He believes that the US is losing its credibility, which is the foundation that has helped the country become the safest investment destination in the world.
Previously, Trump threatened to fire Fed Chair Jerome Powell. Earlier this month, he even dismissed Bureau of Labor Statistics head Erika McEntarfer for allegedly falsifying employment data.
"Today's move is another example of how concerns about the Fed's independence are putting pressure on the USD and could affect the composition of the Federal Open Market Committee (FOMC) in the coming period," said Christopher Wong, a currency strategist at OCBC.
This further increases the likelihood of a Fed rate cut and reinforces the forecast of a weakening USD. The Fed's next policy meeting will take place in mid-September.
Ha Thu (via Reuters)
