US Dollar Index Hits 3.5-Year Low as Trump Considers Replacing Fed Chair Powell

US Dollar Index Plunges to 3.5-Year Low as Trump Eyes Replacement for Fed Chair Powell

The US Dollar Index (DXY) fell sharply to 97.60 during early Thursday trading, hitting its lowest level in over three years. The plunge follows reports that US President Donald Trump plans to replace Federal Reserve (Fed) Chairman Jerome Powell, raising investor concerns over the Fed’s independence and credibility.

Trump Moves to Replace Powell Ahead of Schedule

According to a report by the Wall Street Journal, President Trump is preparing to name a successor to Powell by September or October. Sources indicate that Trump is frustrated with Powell’s approach to monetary policy and is looking to install someone more aligned with his economic vision.

Potential candidates reportedly include:

Kevin Warsh, former Fed Governor
Kevin Hassett, Director of the National Economic Council
Scott Bessent, Treasury Secretary candidate being promoted by both Warsh and Hassett's teams

Fed Independence at Risk?

Markets reacted sharply to the news, with the Dollar retreating against major currencies. Analysts worry that replacing Powell could undermine the Fed’s independence, potentially rattling investor confidence and creating uncertainty about future interest rate decisions.

“The move would bring into question the potential loss of Fed independence and potentially damage credibility,” said Kieran Williams, Asia FX Head at InTouch Capital Markets.

Focus on US Q1 GDP and Market Outlook

Traders are also closely watching for the release of the final Q1 US GDP Growth Rate, Durable Goods Orders, and Initial Jobless Claims, due later today. These economic indicators will help clarify the broader US economic trajectory and could either ease or amplify pressure on the Dollar.