NEW YORK CITY, New York: The U.S. dollar tumbled against major currencies as markets reacted to a threat by the Trump administration to pursue a criminal indictment against Federal Reserve Chair Jerome Powell, raising fears over the future independence of U.S. monetary policy and the greenback's safe-haven appeal.

The dollar fell sharply versus the euro and the Swiss franc and edged lower against the Japanese yen. The dollar index, which tracks the currency against a basket of six peers, was down 0.37 percent at 98.759, snapping a five-day winning streak. Gold surged to a record US$4,600.33 an ounce after Powell released a video defending the independence of the central bank.

"The point is that the central bank's response function is likely to change fundamentally and in the long term if the White House succeeds (in gaining control of monetary policy)," said Thu Lan Nguyen, head of forex and commodity research at Commerzbank. She noted the Federal Reserve is already in a rate-cutting cycle, adding: "However, as the foreign exchange market is forward-looking, this already justifies a higher US dollar risk premium today."

Some analysts said markets have not yet panicked, as investors still expect U.S. President Donald Trump to appoint a credible successor to Powell and allow that person to steer policy.

The Swiss franc led gains, rising 0.52 percent to 0.7968 per dollar, while the euro climbed 0.44 percent to $1.1688 — its most significant daily rise since December 10 — as U.S. political uncertainty triggered a selloff in American assets.

Earlier in the session, the dollar had touched a one-month high in Asian trade after the U.S. jobs report on January 9 bolstered expectations the Fed would hold interest rates steady later this month. Heightened geopolitical tensions, including reports of hundreds of deaths during protests in Iran, had also supported demand for traditional safe havens.

Against the yen, the dollar was last down 0.1 percent at 157.80, not far from a one-year high. Investor caution was compounded after a coalition partner of Japanese Prime Minister Sanae Takaichi said she might call a snap election on February 8 or February 15.

Geopolitical tensions in Iran "should be positive for the U.S. dollar, but we haven't seen any upside there yet," said Kyle Rodda, senior market analyst at Capital.com. "The question from here is whether the momentum behind the protest movement continues and whether the regime cracks down even harder, opening the door to some U.S. involvement."

Trump said the United States might meet Iranian officials and was in contact with opposition figures as he weighed options, including military action.

Markets are bracing for a packed week of data, starting with the U.S. consumer price index for December, one of the last major releases before the Fed's policy meeting at the end of January. Investors are also watching for a possible U.S. Supreme Court ruling on the legality of Trump's emergency tariffs, which could come as soon as January 14.

Elsewhere, the dollar slipped 0.1 percent against the offshore Chinese yuan to 6.9706, its weakest level in a week and near its softest since May 2023. A former Chinese foreign exchange regulator cautioned in a blog post that the yuan's rise does not necessarily signal a revaluation of the currency or Chinese assets, citing a lack of support from underlying fundamentals.