Dollar's Ride Amid Fed Shake-Up and Economic Uncertainty

The dollar experienced fluctuations as President Trump's temporary Federal Reserve appointment raised expectations for a dovish policy direction. Although the dollar firmed slightly, it faced a weekly decline due to anticipation of U.S. rate cuts. Concerns over the Fed's independence continue amidst economic uncertainties.

The dollar witnessed minor strength on Friday, though it is headed for a weekly drop as U.S. President Donald Trump's temporary Federal Reserve appointee stirs expectations of a dovish successor to Chair Jerome Powell after his term expires. The yen dipped slightly against the dollar, which also appreciated 0.25% against the euro and 0.29% against the Swiss franc.

Amid concerns of slowing U.S. economic progress, particularly in the labor market, hopes for Fed rate cuts mount, causing the dollar to tumble by 0.6% for the week against a basket of currencies. On Friday, the dollar index rose by 0.1% to 98.15. Markets remain fixed on Trump's nomination of Council of Economic Advisers Chairman Stephen Miran to fill a vacant seat at the Fed, following Governor Adriana Kugler's unexpected resignation.

While worries persist over the Fed's independence following critiques from Trump, analysts suggest Miran's appointment might not greatly impact this. As the focus shifts to next week's U.S. consumer price inflation data, the Fed's policy path will be guided by potential tariff-driven price pressures.

(With inputs from agencies.)