U.S. Dollar Plummets to Lowest Level in Nearly Three Weeks Amid Fed Subpoena Fallout

The U.S. dollar posted its steepest decline in nearly three weeks, with the euro/dollar pair climbing to 1.1085, the highest level since December 2025. USD/JPY slid to 147.20, reflecting growing market apprehension about the Federal Reserve’s accountability. The move followed the release of official documents confirming that the Fed had received subpoenas related to internal communications and decision-making processes during the 2023–2024 rate-hiking cycle. The development has triggered renewed scrutiny over the central bank’s independence and transparency, particularly as lawmakers demand access to records tied to key rate decisions. Market participants now reassess the timing and pace of future rate cuts, with the U.S. 10-year Treasury yield dropping 8 basis points to 4.12%, signaling diminished confidence in sustained rate hikes. Investors are increasingly pricing in a dovish pivot, with Fed funds futures indicating a 68% probability of a rate cut by June 2026—up from 52% before the subpoenas emerged. This shift has pressured dollar-denominated assets, affecting both equity indices and bond markets, particularly in sectors sensitive to interest rate fluctuations. Global markets reacted swiftly, with European equities and Japanese yen outperforming. The broader DXY index fell 1.02% to 103.85, its weakest level since January 1, 2026. The episode underscores how regulatory uncertainty can rapidly alter monetary policy expectations and influence cross-border capital flows.