(Bloomberg) -- The dollar declined the most in almost three weeks as the Federal Reserve faced grand jury subpoenas from the Justice Department, reviving concerns over political interference in monetary policy.

The Bloomberg Dollar Spot Index fell 0.3% on Monday, set for its biggest drop since Dec. 23. That’s after Fed Chair Jerome Powell revealed the central bank had been served grand jury subpoenas, threatening a criminal indictment tied to his June testimony on headquarter renovations.

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Powell said the threat of criminal charges stemmed from the central bank setting interest rates based on its own assessment rather than following preferences of President Donald Trump. Trump has repeatedly slammed Powell on social media, urging rate cuts and at one point threatening to fire him — before later backing off and denying he ever considered it.

“Trump seems adamant to exert control over the Federal Reserve, potentially undermining the Fed’s monetary policy independence,” said Fiona Lim, a senior FX strategist at Malayan Banking Bhd in Singapore. “Trump’s impatience and resolve to get borrowing costs lower suggests that his pick for the next chair could be a dove and a loyalist and that could be a risk to the greenback.”

What Bloomberg strategists say:

“Macro traders are set to lean into US dollar shorts amid the risk that Powell is hampered in fulfilling his role as Fed chair.”

Mark Cranfield, Markets Live Strategist. Read more on MLIV.

Escalating tensions are fueling anxiety over the central bank’s autonomy, potentially upending the bullish options sentiment seen at the start of the year. The dollar opened 2026 with a strong bias, particularly against the euro, a distinct shift from December’s dynamics. That leaves short-term positioning vulnerable to a further unwind amid the latest developments.

The dollar’s position as the world’s reserve currency depends on institutional trust, Nigel Green, chief executive officer of financial-advisory firm deVere Group, wrote in a note. “History teaches that countries that allow political leaders to dominate central banks pay a heavy economic price.”

Still, any weakness in the US currency in the coming sessions may not translate to a bigger trend. According to Jonas Goltermann, deputy chief markets economist at Capital Economics, there are still plenty of reasons to be positive on the greenback, despite the latest threats to Fed’s independence.

For currency traders, US CPI data due Tuesday and the start of US earnings season are also in focus.

--With assistance from Michael G. Wilson.

(Updates throughout.)

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