The U.S. dollar remained under pressure on Thursday, as lingering uncertainty over U.S. economic policy and geopolitical decisions continued to weigh on sentiment. Supportive remarks from the White House and European officials helped stabilize the currency somewhat, but failed to fully reverse recent losses.
On the monetary policy front, the Federal Reserve struck a more relaxed tone on labor market conditions and inflation risks overnight. Investors interpreted the messaging as a signal that interest rates could remain on hold for longer than previously expected.
Earlier this week, the dollar suffered a sharp selloff, tumbling to a four-year low after U.S. President Donald Trump appeared to dismiss concerns over the currency’s weakness. The slide eased a day later after Treasury Secretary Scott Bessent reaffirmed Washington’s commitment to a strong-dollar policy.
Euro stalls after rapid gains
The euro briefly pushed above the key $1.20 level as the dollar fell, but retreated slightly in Asian trading to around $1.1988. Policymakers at the European Central Bank raised concerns over the pace of the currency’s appreciation, which helped cap further gains.
Analysts noted that the $1.20 level acted as a psychological trigger for markets. Some also warned that euro-dollar movements may be masking broader strength in the single currency, a factor that could feed into future ECB inflation forecasts.
Dollar remains on the defensive
Although heavy selling pressure eased on Thursday, the greenback stayed on the back foot. It fell 0.43% against the Swiss franc to 0.7654, close to an 11-year low, while sterling hovered near a 4½-year high at $1.3844.
The Australian dollar continued to outperform, climbing to a three-year high and rising 0.72% to $0.7092. The currency has drawn support from growing expectations that domestic interest rates could be raised as soon as next week.
The dollar’s earlier selloff marked its sharpest drop since Trump’s tariff actions rattled markets last April. Already down about 2% for the year, the currency has been pressured by concerns over unpredictable policymaking, repeated criticism of the Fed, and uncertainty surrounding the future rate path.
Fed independence a key risk
Strategists say the dollar’s outlook now hinges heavily on developments around central bank independence. Attention remains on a potential U.S. Supreme Court ruling related to Trump’s efforts to remove Fed Governor Lisa Cook, a case widely viewed as a test of the Fed’s autonomy.
Analysts warn that any erosion of Fed independence would pose a significant long-term risk to the dollar’s global dominance.
Against a basket of major currencies, the dollar index hovered near 96.06, remaining close to Tuesday’s four-year low.
The weaker dollar offered some relief to the Japanese yen, which rose 0.25% to 153 per dollar. The yen has largely traded between 152 and 154 this week amid speculation over potential currency intervention by U.S. and Japanese authorities.
Elsewhere, the New Zealand dollar climbed near a seven-month high at $0.60925, while the Chinese yuan remained firm near a 32-month peak, steady at around 6.95 per dollar.
