Dollar Rises on Speculation Over Kevin Warsh Fed Nomination

The US Dollar Index (DXY) recorded an increase to around 96.70 during Asian trading on Friday (January 30), buoyed by reports that President Donald Trump is preparing to announce his pick to succeed current Fed Chair Jerome Powell.

The Wall Street Journal reported that Trump is scheduled to make an official announcement regarding the new Fed Chair today. Kevin Warsh is said to be the strongest candidate to fill the position starting in May.

Warsh, who served as a Federal Reserve governor from 2006 to 2011, is regarded as a policy hawk by much of the market. Despite having adopted a more dovish tone in recent years, including support for interest rate cuts during Trump's presidency, investors continue to view him as one of the more orthodox and hawkish options among the potential candidates. Additionally, Warsh is also considered to have solid political support.

Analysts say that a Warsh appointment would likely signal a more conventional approach to monetary easing, helping to underpin the dollar in the near term following the currency's decline earlier in the week.

"The appointment of Warsh, if it's true, will be seen as someone who can, in a way, remain independent, and not someone seen as likely to be subservient to Trump's wishes," said Khoon Goh, head of Asia research at ANZ Bank in Singapore.

However, doubts remain over the dollar's longer-term outlook. Market participants continue to flag concerns that a series of controversial policy initiatives from the Trump administration could weigh on sentiment and keep the broader dollar trend under pressure.

Goh also noted that position adjustment ahead of the weekend may be contributing to the dollar's rebound. "Any sensible market participant would not want to carry a big position into the weekend," he added. "So some of this could just be positioning lighting ‍up. If you're short dollars, you've done well, take your chips off the table."