Dollar Slips—DoJ Subpoenas Fed, Market Panic
The US dollar weakened sharply on Monday, posting its biggest drop in nearly three weeks after the Federal Reserve faced a subpoena from the US Department of Justice. This situation has resurfaced market concerns: whether monetary policy is starting to be affected by political pressure.
The Bloomberg Dollar Spot Index fell about 0.3%, potentially marking its deepest daily decline since December 23. The decline occurred after Fed Chair Jerome Powell revealed that the central bank had received a subpoena, triggering a swift reaction in the currency market.
For investors, the crux of the issue is not simply the legal process—it also concerns its impact on trust. If the central bank's independence is questioned, markets will perceive interest rate and policy direction as less data-driven, increasing risks to the dollar.
This situation also threatens the sentiment that developed earlier in the year, when the options market appeared quite bullish on the dollar. With the emergence of new "institutional risks," some market participants have begun to reduce aggressive positions and opt for more defensive positions.
Going forward, market focus will be on further developments on this issue, as well as US economic data that could change interest rate expectations. As long as tensions over the Fed's independence persist, dollar volatility has the potential to remain high.
Source: Newsmaker.id
