The US dollar plummeted against major currencies following President Donald Trump’s unprecedented decision to oust Federal Reserve Governor Lisa Cook, effective immediately, citing allegations of mortgage fraud. The Bloomberg Dollar Spot Index dropped 0.3% after Trump announced Cook’s removal on Monday, intensifying concerns about the Federal Reserve’s independence and shaking investor confidence in the world’s reserve currency.
In a letter posted on Truth Social, Trump invoked the Federal Reserve Act, claiming “sufficient cause” for Cook’s dismissal based on a criminal referral from Federal Housing Finance Agency Director William Pulte, a Trump ally. The referral, dated August 15, 2025, alleged that Cook falsified mortgage documents by declaring properties in Michigan and Georgia as primary residences within weeks of each other to secure favorable loan terms. Trump stated, “The American people must have confidence in the honesty of those setting policy at the Federal Reserve,” asserting that Cook’s actions undermined her credibility.
Cook, the first Black woman to serve on the Fed’s Board of Governors, responded defiantly, stating, “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign.” She emphasized her commitment to her duties, noting that she is gathering accurate information to address the allegations, which remain unproven as the Justice Department continues its investigation without formal charges.
Also Read: Tejashwi Yadav: INDIA Bloc’s CM Pick for Bihar?
The move sparked market volatility, with the Treasury yield curve steepening. Two-year Treasury yields fell four basis points to 3.69%, signaling expectations of a potential Fed interest-rate cut next month, while 30-year yields rose to 4.93% amid fears of looser monetary policy fueling inflation. The yen gained 0.5% against the dollar, reflecting a shift toward alternative safe-haven assets.
“This is a dollar-negative event,” said Carol Kong, a strategist at Commonwealth Bank of Australia. “Cook’s removal opens the door for Trump to appoint a governor more aligned with his push for lower interest rates, challenging the Fed’s independence.” Anna Wu of Van Eck Associates added, “Markets see this as a warning shot. It signals Trump’s intent to reshape the Fed to his playbook, which could accelerate the search for alternatives to the dollar and Treasuries.”
The controversy follows Trump’s broader campaign against the Fed, including criticism of Chair Jerome Powell and scrutiny of the bank’s $2.5 billion headquarters renovation. With Cook’s exit, Trump could nominate a replacement, potentially securing a 4-to-3 majority of appointees on the Fed’s seven-member board if the Senate confirms his pick, Stephen Miran, for another vacant seat. This shift could significantly influence monetary policy, raising fears of political interference in the central bank’s mandate to maintain price stability and employment.
Democratic lawmakers, including Senator Elizabeth Warren, condemned the move as an “authoritarian power grab” that violates the Federal Reserve Act, predicting a legal battle that could reach the Supreme Court. The Fed’s independence, a cornerstone of its credibility, now faces heightened scrutiny as global markets brace for further volatility.
Also Read: PM Modi Credits Concert Economy for Ahmedabad’s Tourism Growth