Asian currencies moved lower on Wednesday as investors grew cautious following President Donald Trump’s attempt to remove Federal Reserve Governor Lisa Cook, raising fresh concerns over the central bank’s independence. The Australian dollar, however, held steady after stronger-than-expected inflation data.
The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, gained 0.2% in Asian trading hours, recovering from slight losses on Tuesday. Dollar index futures were also 0.2% higher as of 04:11 GMT.
Trump’s announcement that he would dismiss Fed Governor Cook over alleged mortgage irregularities fueled market fears about political interference in monetary policy. Analysts warned the Federal Open Market Committee (FOMC) could tilt more dovish if Cook is removed, potentially accelerating rate cuts. ING noted the case will likely head to court, leaving uncertainty over whether Cook will keep her seat during the appeal process.
The U.S. dollar regained ground as markets assessed the impact, but Fed policy uncertainty continues to influence expectations for interest rate differentials between the U.S. and Asia. The Japanese yen weakened, with USD/JPY up 0.3%, while the Chinese yuan remained stable in both onshore and offshore markets. The South Korean won slipped 0.1%, the Singapore dollar firmed 0.2%, and the Indian rupee edged lower as new 25% U.S. tariffs on Indian goods took effect.
In contrast, the Australian dollar was steady after July’s Consumer Price Index (CPI) rose 2.8% year-on-year, beating forecasts of 2.3% and sharply higher than June’s 1.9%. The increase was driven mainly by higher electricity prices after the expiry of government rebates. The data complicates the Reserve Bank of Australia’s policy outlook, coming just weeks after it cut rates by 25 basis points and signaled possible further easing if inflation slowed.
