FOREX-Dollar weakens as Trump's move to fire Fed governor spooks investors

The dollar weakened against major currencies on Tuesday as President Donald Trump's unprecedented move to fire Federal Reserve Governor Lisa Cook renewed concerns over the central bank's independence. The euro rose 0.37% against the dollar to $1.1664 while sterling rose 0.24% to $1.3486. Against the Japanese yen, the dollar fell 0.13% to 147.57 yen, and it slipped 0.24% against the Swiss franc at $0.80400.

The dollar index =USD, which measures the greenback against a basket of currencies, fell 0.33% to 98.15. Trump said he was removing Cook over alleged improprieties in obtaining mortgage loans, a step that could test the boundaries of presidential power over the Fed. In response, Cook said Trump has no authority to fire her from the central bank, and she will not resign.

Trump's announcement surprised markets but the reaction was relatively muted with investors caught between the concerns over politicization of policy and the payoffs for markets. "The noise surrounding Trump's attempt to dismiss Governor Cook has left markets largely unmoved," said Karl Schamotta, chief market strategist at Corpay in Toronto.

The market was little changed after better-than-expected durable goods and consumer confidence data. The U.S. president has repeatedly berated Fed Chair Jerome Powell for not lowering interest rates, though he has stopped threatening to fire him ahead of the end of his term in a little under 9 months.

Traders are currently pricing in an 86% probability of a rate cut at the Fed's September meeting. Morgan Stanley on Tuesday became the latest brokerage to forecast a cut in interest rates in September, joining global peers after Powell hinted at policy-easing next month in a speech last week.

"The unpredictable actions of the administration eroding confidence in the U.S., along with the prospect of a stacked, more dovish Fed in the future, has kept the dollar in check this morning," said Uto Shinohara, senior investment strategist at Mesirow Currency Management. While investors may be inclined to sell the dollar, lingering economic and fiscal worries in Europe also narrow the available currencies to bet on a decline in the U.S. currency, said Kenneth Broux, head of corporate FX and rates research at Societe Generale.

France's government bonds fell on Tuesday as the country's minority government looked increasingly likely to be ousted next month. The 10-year government bond yield rose to a peak of 3.53%, its highest since March and adding to Monday's 7 basis point climb. Bond yields move inversely to prices.

Worries over renewed political instability in France added to jitters in global bond markets about the independence of the U.S. Federal Reserve, which contributed to selling in government bonds from the U.S., Britain and Japan. "The broader question for the euro is whether recent French news destabilises appetite for the euro more broadly, or whether this is an isolated French issue," analysts at ING said in a note.

In cryptocurrencies, bitcoin rose 0.57% to $110,286.43, attempting to break a three-day losing streak, while ether climbed 3.34% to $4,504.07.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)