U.S. Dollar Retreats as Trump Ousts Fed Governor Lisa Cook

NEW YORK, Aug. 26, 2025 - The U.S. dollar weakened across major currency markets on Tuesday after President Donald Trump announced he was removing Federal Reserve Governor Lisa Cook from the Fed’s board, stoking concerns over central bank independence and the outlook for U.S. interest rates.

In Asian trading hours, the Bloomberg Dollar Spot Index fell 0.3% as investors weighed the political intervention against the Federal Reserve’s policy-making process. The ICE U.S. Dollar Index (DXY) slid 0.16% to 98.26, giving back gains from Monday’s session following Trump’s letter posted on his Truth Social platform.

Against individual currencies, the dollar:

  • Dropped 0.4% versus the Japanese yen to 147.24 yen.
  • Slipped 0.3% against the euro to $1.165.

Treasury yields also reacted. The yield on benchmark 10-year U.S. Treasuries rose to 4.29% from Monday’s 4.275% as traders reconsidered the timing of potential rate cuts. Two-year yields briefly fell on renewed speculation the Fed might loosen policy sooner than expected, following Trump’s repeated calls for rate cuts.

Market strategists warned that any erosion of Fed independence could undermine confidence in U.S. assets and accelerate a shift out of dollars and Treasuries. “Removing Cook increases concerns over Fed independence,” said Rodrigo Catril, strategist at National Australia Bank in Sydney. “If Trump succeeds, he could have four board members aligned with his view, making it hard to trust U.S. monetary policy.”

Precious metals, often viewed as safe havens when the dollar falls, rallied in tandem. Spot gold climbed 0.5% to $3,384.34 per ounce, its highest level since Aug. 11, as the dollar’s pullback made bullion more attractive to overseas buyers. December gold futures rose 0.4% to $3,432.40.

Looking ahead, traders will focus on this week’s key U.S. data releases, including the Personal Consumption Expenditures Price Index on Friday and durable goods orders and consumer confidence on Tuesday, which could further influence Fed rate-cut expectations.