The U.S. dollar briefly tumbled on Wednesday on news reports that U.S. President Donald Trump is planning to fire Federal Reserve Chair Jerome Powell, but pared the decline after Trump made a denial.
Trump said that he is not planning on doing anything, while continuing to note his displeasure that Powell is being too slow to cut interest rates.
An unidentified source earlier told Reuters that Trump is open to the idea of firing Powell and said he polled some Republican lawmakers about firing Powell and received a positive response.
Removing Powell before his term ends next May would be negative for the dollar if it undermined confidence in the U.S. financial system , an independent central bank and the dollar as a safe-haven currency.
"What can kill the value of the U.S. dollar, what can absolutely destroy faith in the U.S. dollar, is attacking in any way, shape, or form the independence and authority of the Federal Reserve," said Juan Perez, senior director of trading at Monex USA in Washington.
Trump has railed against Powell for months for not easing rates and the Trump administration has also recently criticized cost overruns on a $2.5 billion renovation of the Fed's Washington headquarters.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last down 0.4% on the day at 98.24, with the euro up 0.4% at $1.1648.
Against the Japanese yen, the dollar weakened 0.7% to 147.83.