The U.S. dollar was reported to have rebounded broadly on Thursday after experiencing a volatile session the day before, when widespread reports suggested that President Donald Trump was preparing to dismiss Federal Reserve Chair Jerome Powell. Those reports, which had initially rattled markets, were later denied by the president, helping stabilize sentiment. Analysts observed that the dollar’s recent performance reflected a mix of technical consolidation and a reaction to evolving economic and political dynamics.
Throughout the month, the dollar had been staging a recovery after enduring a historic sell-off during the first half of the year. Analysts noted that the dollar index, despite the rebound, remained nearly 9% lower on a year-to-date basis, underscoring the severity of the earlier decline. The renewed upward momentum was said to have been underpinned by rising U.S. Treasury yields, which were providing support for the greenback in the second half of the year.
Market strategists commented that the dollar’s gains in July appeared to have been driven in part by short-covering, as traders who had bet heavily against the dollar earlier in the year unwound their positions. Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, was quoted as saying that the stronger footing observed in recent weeks was largely a function of firmer U.S. interest rates and investors repositioning themselves following the dramatic depreciation earlier in the year.
Economic data released on Thursday added to the narrative of resilience in parts of the U.S. economy. Government figures showed that retail sales in June had rebounded more strongly than economists had forecast, while applications for jobless benefits fell compared to the previous week. These reports initially extended the dollar’s gains, but the currency soon retreated to levels close to those seen before the data were published. This pattern, according to Chandler, highlighted what he described as “a lack of near-term conviction” among traders, reflecting the ongoing uncertainty over the economic outlook and policy direction.
Investors were also observed to be grappling with a complex array of factors, including the potential economic consequences of the Trump administration’s tariff policies, the implications of the U.S. fiscal position, and questions surrounding the independence of the Federal Reserve. The dollar’s sharp decline on Wednesday had been triggered by reports claiming that President Trump had already drafted a letter dismissing Powell and had sought input from Republican lawmakers on whether he should proceed with removing the Fed chair. However, after the president publicly denied the reports, the dollar pared its losses, though sentiment remained fragile.
Former Federal Reserve Governor Kevin Warsh, who has been mentioned as a possible successor to Powell, weighed in on the broader policy debate on Thursday. Warsh called for a new agreement between the Treasury Department and the central bank, reminiscent of the 1951 accord that established a clear separation between federal debt management and monetary policy. His remarks underscored the ongoing concerns about political interference in monetary policy and its potential impact on markets.
The dollar index, which tracks the greenback’s value against a basket of six major currencies including the euro and the yen, was reported to have risen by 0.41% to 98.75. The euro fell 0.45% to \$1.1582, after earlier touching its weakest level since late June at \$1.1555. Sterling also weakened slightly, with the British pound slipping 0.1% to \$1.3405 after data showed that wage growth in the U.K. slowed in May and employment figures declined again in June.
In Asia, concerns mounted over Japan’s upcoming upper house election, with polls indicating that Prime Minister Shigeru Ishiba’s coalition risked losing its majority. Meanwhile, Tokyo continued to negotiate with Washington in an attempt to avert a 25% tariff on Japanese exports, which was scheduled to take effect if no agreement was reached by an August 1 deadline. Japan’s top trade negotiator, Ryosei Akazawa, held talks on Thursday with U.S. Commerce Secretary Howard Lutnick as part of the ongoing discussions. The yen weakened against the dollar by 0.58% to 148.73, retreating further from recent highs and reflecting nervousness about the political and trade outlook.
The Australian dollar was also reported to have fallen sharply after domestic employment data missed expectations and unemployment rose to its highest level since late 2021. The Aussie was last seen trading 0.64% lower against the greenback at \$0.6484.
In digital currencies, bitcoin posted a modest decline of 0.22%, trading at approximately \$119,676 as broader market sentiment remained subdued.
Taken together, the day’s market movements illustrated how investors continue to navigate an environment marked by shifting policy signals, global trade disputes, and economic crosscurrents. Although the dollar’s rebound was notable, analysts cautioned that underlying uncertainties—including the Fed’s future independence, tariff negotiations, and broader geopolitical risks—would likely keep volatility elevated in the weeks ahead.
