Key Facts
• Trump denied plans to dismiss Federal Reserve Chair Jerome Powell.
• Yen rose over 1% to 146.90 per dollar before retreating to 148.
• White House official earlier suggested Powell’s dismissal was likely.
• Dollar fell sharply, with Bloomberg Dollar Spot Index dropping 0.7% temporarily.
• Euro and pound surged but pared gains after Trump’s denial.
• Wells Fargo strategist Arup Chatterjee warned Powell’s dismissal could raise dollar risk premium.
• Chatterjee predicted a 3% drop in the dollar index if Powell is dismissed.
• Treasury yields could rise, steepening the yield curve, according to Chatterjee.
Summary
The yen experienced significant volatility following conflicting statements about Federal Reserve Chair Jerome Powell’s potential dismissal. A White House official suggested Powell’s removal was likely, causing the yen to surge 1.3% to 146.92 per dollar. However, President Trump later denied such plans, leading the yen to retreat to 148 per dollar. The dollar initially fell, with the Bloomberg Dollar Spot Index dropping 0.7%, but it recovered to near pre-statement levels. Euro and pound movements mirrored this trend. Wells Fargo strategist Arup Chatterjee warned that Powell’s dismissal could destabilize inflation, increase the dollar’s risk premium, and steepen the yield curve. He projected a potential 3% drop in the dollar index on the day of such an event.
