Trump's Unprecedented Move: Fed's Independence in Jeopardy

The dollar faced a volatile session on Tuesday following President Trump's announcement to remove Federal Reserve Governor Lisa Cook. This move, perceived as a strike against the central bank's independence, caused the dollar index to drop significantly before stabilizing.

The greenback's strength against six major currencies showed a slight decline, amid concerns about potential rate cuts and institutional risks. Charu Chanana from Saxo in Singapore highlighted that while market panic is absent, investors are recalibrating due to the implications on Fed independence.

This unprecedented decision against the Fed further fueled investor worries about U.S. monetary policy, with bond yields experiencing mixed reactions. Despite political unrest affecting currencies globally, the uncertainty remains over the future direction of U.S. economic governance.

(With inputs from agencies.)