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Dollar Rises, US Bonds Fall as Trump Set to Choose Warsh for Fed.
foreign exchange :: 2026-01-30 :: source - bloomberg
By David Finnerty and Matthew Burgess
(Bloomberg) -- The dollar rose and Treasuries fell after US President Donald Trump was said to be preparing to nominate Kevin Warsh as the next Federal Reserve chair, seen by markets as a relatively hawkish choice.
The Bloomberg dollar index climbed 0.3%, gaining versus all its major peers, while the Treasuries drop was led by the long-end with 30-year yields jumping five basis points. Trump has settled on Warsh, according to people familiar with the matter, who cautioned that the selection wasn’t final until a formal announcement was made.
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Warsh has long been considered an inflation hawk, having often emphasized price risks during the financial crisis while others focused on growth. That is raising questions around his policy direction after he recently aligned himself with Trump by arguing publicly for lower borrowing costs.
“Whatever he may say now, Warsh has a long hawkish history that markets have not forgotten, so the dollar and yields are higher,” said Sean Callow, a senior analyst at ITC Markets in Sydney.
The market moves are a sign the monthslong uncertainty over the next Fed chief is now getting closer to a resolution. Warsh, a former Fed governor and one of the four finalists on Trump’s shortlist to be the next central bank leader, visited the White House on Thursday, one of the people said.
Betting markets have increasingly favored Warsh, with Polymarket showing his chance of becoming the next Fed chair rising above 90% on Friday, as support faded for BlackRock Inc. executive Rick Rieder. Flows into interest-rate futures betting on a dovish policy shift had accelerated in recent days as Rieder’s odds moved to the top, with investors viewing him as more dovish than Warsh.
Warsh has a disdain for big balance sheets, another key issue for markets looking at how the candidate will manage the central bank’s $6.6 trillion pile. At stake is whether the central bank should keep buying Treasury bills to maintain its balance sheet at present levels, or remove more liquidity.
Trump had teased his impending announcement without giving the name away Thursday evening, saying the pick won’t be too surprising and is someone who could have been in the position years ago. The president said he planned to announce his choice on Friday.
What Bloomberg’s Strategists Say...
It’s rare to see Treasury yield curve steepening during Asian sessions, which suggests this move is a defensive measure by investors to prepare for a more hawkish, rule-oriented regime under Kevin Warsh.
— Mark Cranfield, Markets Live strategist. Click here for the full analysis.
Warsh served on the US central bank’s Board of Governors from 2006 to 2011 and has advised Trump on economic policy. If nominated and confirmed, he would succeed Jerome Powell, whose term at the helm ends in May.
Indications of a more orthodox choice for Fed chair comes at a time when concerns over unpredictable US policy making, unsustainably large deficits and political interference in central bank policy are pressuring markets. Trump had indicated he favored a weaker greenback in comments earlier this week, before Treasury Secretary Scott Bessent said the administration supports a strong dollar policy.
“Warsh is seen as credible and respectful of the Fed’s independence – something that should help avoid dollar debasement trades and credibility-induced steepening of the Treasury curve,” said Evelyne Gomez-Liechti, a strategist at Mizuho International Plc.
The dollar has dropped this year amid the so-called debasement trade, which is a bet on a long-term decline in its purchasing power. Bloomberg’s gauge of the currency slid to its lowest level in almost four years this week.
The nomination of Warsh is seen as potentially countering some of those factors.
“The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is likely to be announced as the new Federal Reserve Chair nominee today offers exactly that,” Francesco Pesole, an FX strategist at ING Groep NV, wrote on Friday. “It appears this could at least lower the risks of another major leg lower in the dollar for now.”
--With assistance from Edward Bolingbroke, James Hirai and Joanna Ossinger.
(Updates throughout)
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