The U.S. dollar pulled back from a one-month high early on Monday after U.S. prosecutors launched a criminal investigation involving Jerome Powell, intensifying tensions between the Federal Reserve and the administration of Donald Trump.
The dollar index, which tracks the greenback against a basket of six major currencies, slipped 0.3% to 98.899, ending a five-day rally. Gold prices surged to a record $4,563.61 per ounce after media reports confirmed the investigation and Powell released a video statement reaffirming the Fed’s independence.
Ray Attrill, head of FX strategy at National Australia Bank in Sydney, said Powell appeared to be pushing back strongly against political pressure. Attrill noted that the increasingly public clash between the central bank and the U.S. administration was undermining confidence in the dollar.
Earlier in Asian trading, the dollar had found some support following Friday’s U.S. jobs report, which reinforced expectations that the Federal Reserve will keep interest rates unchanged later this month. At the same time, reports of hundreds of deaths during protests in Iran added to geopolitical uncertainty and boosted demand for safe-haven assets.
Kyle Rodda, senior market analyst at Capital.com in Melbourne, said geopolitical tensions would normally support the dollar, but markets had yet to see a sustained upside reaction. He added that investor focus remains on whether unrest in Iran escalates further and potentially draws in U.S. involvement.
Markets are now bracing for a packed economic calendar, highlighted by Tuesday’s release of the U.S. consumer price index for December. The inflation data is among the final key indicators ahead of the Federal Reserve’s next policy meeting later this month. Analysts at Standard Chartered said U.S. inflation remains above the Fed’s 2% target, limiting the scope for further rate cuts unless economic momentum weakens significantly. They also noted that a stable labor market should continue to place mild upward pressure on U.S. Treasury yields and the dollar.
Investor attention will also turn to the start of the fourth-quarter earnings season, with major U.S. banks reporting results in the coming week. Additionally, a potential ruling from the Supreme Court on the legality of Trump’s emergency tariffs could be announced as soon as Wednesday.
In currency markets, the dollar fell 0.2% against the Japanese yen to 157.56, retreating from a one-year high. The move followed comments from a senior figure in Japanese Prime Minister Sanae Takaichi’s coalition, suggesting a snap election could be held in February.
The euro rose 0.2% to $1.1664, rebounding from a one-month low. The dollar also weakened slightly against the offshore Chinese yuan, slipping 0.1% to 6.968. Sterling edged 0.2% higher to $1.3433, while the Australian dollar gained 0.2% to $0.6704 and the New Zealand dollar advanced 0.2% to $0.5746.
In cryptocurrencies, Bitcoin climbed 1.0% to $91,533.13, while ether rose 0.3% to $3,127.37.
