The dollar fell against the yen and euro after Trump said on social media he was removing Lisa Cook from her position on the Fed’s board of directors, the latest in a series of attacks on the central bank’s independence.
Asian shares followed declines on Wall Street as prospects for a Fed rate cut next month became less certain. US stock futures retreated.
“All of this, tariffs included, is just another reason the US can’t be trusted,” said Bart Wakabayashi, the Tokyo Branch Manager of State Street. “There’s no credibility. That’s the basis of the US being the safest investment in the world. If you’re a responsible investor, it gives you pause.”
The dollar dropped 0.4% to 147.24 yen. The euro was up 0.3% on the day at US$1.165.
The yield on benchmark 10-year Treasury notes rose to 4.2887% compared with its US close of 4.275% on Monday.
“I have determined that there is sufficient cause to remove you from your position,” Trump said in a letter to Cook posted on his Truth Social platform.
Trump said there was enough evidence that Cook had made false statements on mortgage applications.
Trump has regularly threatened to fire Fed Chair Jerome Powell, who was nominated by Trump during his first term in the White House and then nominated for a second term by Biden. Trump, who lacks the legal authority to fire the Fed chair except “for cause”, has backed away from that threat as Powell gets closer to the expiration of his term as Fed chief next May.
Cook’s exit from the Fed could speed up the president’s reshaping of the Fed. Her term had been due to end in 2038.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2%, after US stocks ended the previous session with mild losses. Japan’s Nikkei .N225 index sank 1.3%.
Major brokerages, including Barclays, BNP Paribas and Deutsche Bank, now expect a 25-basis-point Fed rate cut in September. Fed funds futures traders are pricing in 84% odds of a September cut, according to the CME Group’s FedWatch Tool.
Data for August due before the Fed’s Sept 16-17 meeting could still sway Fed policy. The US personal consumption prices reading, due on Friday, is considered the Fed’s preferred inflation gauge. Hotter-than-expected US producer price data last month raised some questions over the certainty of a cut.
US crude dipped 0.4% to US$64.56 a barrel. Gold was slightly higher, trading at US$3,378.09 per ounce.
US stock futures, the S&P 500 e-minis, were down 0.17% at 6,444.5.