Dollar Steadies as Trump Retracts Fed Chair Threats

The U.S. dollar rose sharply as President Trump backed away from threats to fire Federal Reserve Chair Powell. Optimism around trade deals improved market sentiment. Investors had been worried about the Fed's independence amid Trump's attacks, but assurance from Trump eased those concerns, helping stabilize the dollar.

The U.S. dollar experienced a sharp rise before stabilizing after President Donald Trump stepped back from threats to dismiss Federal Reserve Chair Jerome Powell. This decision provided relief to investors, as uncertainties about the Fed's independence have been causing market unease following Trump's public discontent with Powell's actions on interest rates.

On Tuesday, Trump confirmed his position to reporters, stating, "I have no intention of firing him," regarding Powell. Trump's latest stance spurred a rapid increase in the dollar against major currencies during Asian trading hours, which then steadied by mid-afternoon European sessions.

Markets are also buoyed by prospects of reduced U.S.-China trade tensions and potential tariff cuts, as suggested by Trump and U.S. Treasury Secretary Scott Bessent. This optimistic outlook has invigorated buyers, with Trump's administration aiming for a de-escalation to maintain asset values, influencing both market and policy leverage.

(With inputs from agencies.)