Dollar Dips Amid Federal Reserve Turmoil and Global Tensions

The U.S. dollar experienced its largest drop in three weeks due to a criminal investigation involving Federal Reserve Chair Jerome Powell. The dollar index fell, while geopolitical tensions in Iran and an impending U.S. consumer price index report influenced market dynamics.

The U.S. dollar took a significant hit on Monday, falling by the most in three weeks following news of a criminal investigation involving Federal Reserve Chair Jerome Powell. This development exacerbated existing tensions with the Trump administration, leading to a 0.2% drop in the dollar index to 99.011, halting a five-day winning streak.

Gold prices soared to an unprecedented $4,600.33 per ounce after the investigation details emerged, prompting Powell to make a public video statement defending the Federal Reserve's independence. Ray Attrill, head of FX strategy at National Australia Bank, remarked on the intensifying conflict between the Fed and the U.S. administration, underscoring concerns over the dollar's position.

The currency initially rallied to a one-month high early in Asian trade, bolstered by Friday's strong jobs report. However, geopolitical tensions in Iran and the potential for U.S. involvement overshadowed these gains. As financial markets brace for a busy week of data releases, including the U.S. consumer price index, analysts weigh in on the Federal Reserve's next policy moves.

(With inputs from agencies.)