NEW YORK — The U.S. dollar and longer-dated U.S. Treasuries took a hit on Tuesday, August 26, 2025, as President Donald Trump intensified his campaign against the Federal Reserve, shaking investor confidence in U.S. financial assets. According to Reuters, the escalation, marked by Trump’s attempt to oust Federal Reserve Governor Lisa Cook, has fueled uncertainty, driving gold prices to a two-week high as a safe-haven asset.
Trump’s announcement, posted on Truth Social, cited allegations from a White House ally that Cook falsified mortgage documents, claiming, “I have determined that there is sufficient cause to remove you from your position.” The move, unprecedented in modern U.S. history, follows Trump’s repeated threats to influence the Fed, including calls to fire Chair Jerome Powell, whose term ends in May 2026. Cook, whose term was set to run until 2038, denied the allegations, asserting, “No cause exists under the law, and he has no authority to do so.” Legal experts, including Columbia Law’s Lev Menand, argue the allegations don’t meet the Federal Reserve Act’s “for cause” standard, predicting a court battle.
The dollar dropped 0.4% against the yen to 147.24 and 0.2% on the dollar index, while the euro rose 0.3% to $1.165. The yield on 10-year Treasury notes climbed slightly to 4.2887%, but longer-dated bonds fell, reflecting market jitters. “All of this, tariffs included, is just another reason the U.S. can’t be trusted,” said Bart Wakabayashi, Tokyo Branch Manager at State Street, highlighting eroded credibility in U.S. assets. Gold, meanwhile, hit $3,378.09 per ounce, signaling a flight to safety.
Key market impacts include:
- Dollar index down 0.2% after a 0.7% gain on Monday.
- 10-year Treasury yield at 4.2887%, up from 4.275% Monday.
- Asian markets, including Japan’s Nikkei, down 1.3%.
Trump’s broader policies, including tariff threats on the EU and Mexico, add to the uncertainty, with posts on X noting increased rate-cut bets as markets anticipate a softer dollar. As the Fed’s September 16-17 meeting nears, with an 84% chance of a 25-basis-point rate cut, investors brace for further volatility.
Source: Reuters
