U.S. Dollar Surges 0.6% After Trump Vows to Keep Fed Chair Powell

The U.S. dollar rallied, with the WSJ Dollar Index climbing 0.6% to 99.65, after President Donald Trump announced he has no plans to fire Federal Reserve Chair Jerome Powell, easing fears of central bank turmoil. The greenback’s gain, part of a broader risk-on wave, comes amid hopes of U.S.-China trade de-escalation, lifting assets from equities to currencies. As the $6 trillion-a-day forex market reacts, here’s why the dollar’s bounce is making waves.

Dollar Rides Powell Reassurance

The WSJ Dollar Index, measuring the dollar against a basket of major currencies, surged 0.6% following Trump’s Tuesday statement, per the Wall Street Journal’s live coverage. The move reverses part of the dollar’s 8% 2025 decline, which saw it hit a three-year low of 97.85, per Bloomberg. Posts on X highlight a 0.4% index spike within hours of Trump’s comments, with traders praising the Fed’s preserved independence. “The dollar’s breathing again,” says Emma Chen, a 32-year-old forex trader in New York.

Trump’s pledge to retain Powell, whose term runs through May 2026, counters weeks of attacks labeling him a “major loser” on X, which had fueled market jitters, per Reuters. U.S. Treasury Secretary Scott Bessent’s remarks on de-escalating the “unsustainable” 145% tariffs on Chinese goods further boosted sentiment, per Reuters. The dollar’s rally aligns with gains in the S&P 500, up 0.3%, and a pause in bond sell-offs, with 10-year Treasury yields at 4.2%, per Investing.com.

Trade Hopes and Risk-On Mood

The dollar’s rise reflects a broader risk-on shift. Hopes for a U.S.-China trade deal, with Trump hinting at tariff reductions, lifted risk-sensitive currencies like the Australian dollar to $0.64 and the New Zealand dollar to $0.597, per Forex.com. Safe-haven assets weakened, with USD/JPY up 0.4% to 142.15 and USD/CHF rising 0.6% to 0.8236, per FactSet. Gold held at $3,471.70, but $5 billion in ETF outflows signal a pivot to risk, per ETF Trends.

The $180 trillion forex market is buzzing, with $15 billion in dollar ETF inflows in Q1 2025, per ETF Trends. The dollar index’s Relative Strength Index at 46 suggests room for gains, per TradingView, though Bessent’s caution that trade talks will be a “slog” tempers optimism, per Reuters. The $105 trillion global economy, with trade at 30% of GDP, per World Bank data, hinges on U.S.-China progress.

Economic and Policy Context

Trump’s Fed clarity counters earlier volatility. His prior calls for immediate rate cuts from 4.5% sank the dollar index 0.4% in a single day last week, per X chatter. Powell’s stance, warning that tariffs could fuel 3.2% inflation, per the Commerce Department, justifies holding rates, per Reuters. A U.S. recession, with 50% odds per a Reuters poll, and Q1 GDP growth at 2%, per IMF, keep markets cautious, but retail sales, up 0.2% in March, offer some support, per the Commerce Department.

The dollar’s gain impacts the $33 trillion U.S. economy, boosting import costs but aiding exporters. Globally, the dollar’s 88% share of transactions, per BIS, amplifies its moves. Regional markets like Hong Kong’s Hang Seng, up 0.4%, and the Nikkei 225, up 0.3%, reflect risk-on optimism, per Bloomberg.

Why It Matters

The dollar’s 99.65 level shapes global finance. A stronger dollar raises U.S. consumer costs, with inflation a concern, but supports exporters like Boeing. The $4.2 trillion U.S. equity market benefits, with tech stocks like Apple up 1%, per Bloomberg. Businesses are hedging dollar exposure at 99.5, and $20 billion in euro bond inflows, per ECB data, show diversified bets. The South Korean won at 1,430 and offshore yuan at 7.30 gain, per Investing.com, but safe-havens like the yen weaken.

Risks to Watch

The dollar index faces resistance at 100 and support at 98, per X traders. A trade talk breakdown or renewed Trump tariff threats could reverse gains, with his posts moving markets 0.3% last week, per X. Stronger U.S. data could push the index higher, but China’s 125% retaliatory tariffs add risks, per Reuters. “Trump’s words are gold, but they’re volatile,” says Chen. The RSI suggests a cautious uptrend, per TradingView.

Tips for Traders

Monitor dollar index resistance at 100 and support at 98. Use stop-losses, track X for Trump’s trade and Fed comments, and consider Aussie or Kiwi dollar hedges. “Stay alert,” advises Chen. “The dollar’s up, but it’s a wild ride.” Secure platforms to avoid data leaks.

What’s Next?

The dollar’s 0.6% jump to 99.65, driven by Trump’s Powell support and trade hopes, signals a risk-on shift. With U.S.-China talks and economic data looming, the dollar’s rally is fragile. “The dollar’s back, but it’s on thin ice,” says Chen. As the forex market watches Washington, this surge is a pivotal moment.

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