Dollar Index Tumbles as Stock Prices React to Fed Tensions

The U.S. Dollar Index plunged to a three-year low on April 21, 2025, dragging stock markets into a volatile session as political pressure on the Federal Reserve unnerved investors. The index dropped to 97.92—its lowest level since March 2022—triggered by former President Donald Trump’s intensified criticism of Fed Chair Jerome Powell and calls for aggressive interest rate cuts.

The dollar’s sharp decline reflected a broader loss of confidence in the central bank’s independence. Trump publicly referred to Powell as a “major loser” and threatened to remove him if re-elected, leading investors to question whether future monetary policy decisions would be politically driven.

Stock markets were swift to respond. The Dow Jones Industrial Average fell nearly 1,000 points, while the S&P 500 and Nasdaq each recorded steep losses. Technology and banking sectors bore the brunt, with investors rotating out of risk assets into safe havens.

Currency markets mirrored the panic. The euro surged past $1.15, reaching a level last seen in late 2021. The Japanese yen strengthened to ¥140 per dollar, while the Swiss franc reached its highest level in a decade. These moves signal a wider retreat from the greenback as global investors hedge against potential instability.

“The messaging from Trump is shaking investor confidence at a time when inflation, employment, and rates all hang in the balance,” said one senior currency analyst. “A politically compromised Fed could alter the investment landscape for years.”

Meanwhile, the commodity markets showed the usual pattern during uncertainty. Gold prices skyrocketed to over $3,440 per ounce, reflecting a sharp uptick in demand for safe-haven assets. Treasury yields dropped, with the 10-year note falling below 3.5%, indicating a shift toward lower-risk government securities.

Analysts warn that if doubts over the Fed’s autonomy persist, the dollar’s status as the global reserve currency could eventually come under pressure. Such a shift would impact international trade, investment, and debt markets.

The next few weeks will be critical. Investors will closely watch whether the Fed issues any statement defending its independence and how markets digest the possibility of political interference in monetary policy.