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Stocks take a breather after relief rally over ceasefire

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Investors eye trade deals ahead of tariff deadline

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Dollar under pressure after Trump attacks Powell again

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Prospect of 'shadow' Fed Chair unnerves investors

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Oil inch higher to stabilize after a volatile month

(Updates to Asia afternoon)

By Ankur Banerjee

SINGAPORE, June 26 (Reuters) - Asian stocks wobbled and

the dollar was under pressure on Thursday as the prospect of an

early appointment of the next Federal Reserve Chair by President

Donald Trump stoked concerns over the independence and

credibility of the U.S. central bank.

The U.S. dollar selling kicked up a notch after a media

report said Trump has toyed with the idea of selecting and

announcing Federal Reserve Chair Jerome Powell's replacement by

September or October in a bid to undermine his position.

A move like that is seen by some analysts as an effort to

influence monetary policy through a "shadow" Fed chair even

before Powell leaves office in May 2026.

While markets have been soothed by a ceasefire between

Israel and Iran that appeared to be holding, reducing the risks

of disruptions to the oil trade and underpinning sentiment,

traders are on edge about Trump's July 9 deadline on imposing

tariffs on trading partners and his pressure on the Fed.

In stocks, MSCI's broadest index of Asia-Pacific shares

outside Japan was slightly higher as the rally

in Wall Street took a breather overnight. Tokyo's Nikkei

rose 1.5% to highest since lat January.

European stock futures pointed to a muted open with

currency markets taking the spotlight. The euro firmed

to its strongest level since September 2021 and last fetched

$1.6837.

The Swiss franc firmed to a decade-high while the

Japanese yen strengthened 0.3% to 144.815 per dollar.

Trump has repeatedly criticised Powell for not cutting

interest rates and has floated the idea of firing him or naming

a successor soon, denting investor confidence in U.S. assets and

undermining the central bank's independence.

"I think it's a given that Trump's pick to succeed Powell,

when it comes, will be one that sits at the highly dovish end of

the spectrum and will support Trump's agenda of lowering

interest rates," said Tony Sycamore, market analyst at IG.

"The issue with this is it will resurface questions from

earlier in the year around the Fed's independence, which, as we

saw, undermines confidence in the Fed and the USD."

The dollar index, which measures the U.S. currency

against six rivals, wallowed at its lowest level since March

2022. The index has slid 10% this year as investors, worried by

Trump's tariffs and their impact on U.S. growth, look for

alternatives.

Financial markets remain on edge over Trump's chaotic trade

policies as the clock ticks down to his July 9 deadline for

trade deals.

Powell, who resumed two days of congressional testimony on

Wednesday, said Trump's tariff plans may well just cause a

one-time jump in prices, but the risk it could fuel more

persistent inflation is large enough for the central bank to be

careful in considering further rate cuts.

Fed officials still expect to cut interest rates this year,

with two priced in by markets but the timing is uncertain as

officials wait on looming trade deadlines and for more certainty

about the scope of the tariffs.

"With the drop in U.S. yields and speculation about the next

Fed chair, investors are considering the impact of a move dovish

Fed, and the dollar is feeling the heat," said Ben Bennett,

Asia-Pacific investment strategist at Legal & General Investment

Management. "Tomorrow's PCE inflation data is going to be

important."

Traders are now pricing in nearly 25% chance of the Fed

cutting rates in its end of July meeting compared to 12.5% last

week, the CME FedWatch tool showed.

The two-year U.S. Treasury yield, which

typically moves in step with interest rate expectations, was

down 1.5 basis points at 3.764%, its lowest level in seven

weeks.

"No one knows exactly how tariffs will impact inflation,

which will keep central banks in conservative mode, particularly

the Fed," said Bank of America strategists, noting downside

risks to global growth remain relevant, not only due to trade

wars but also due to geopolitical developments.

"We are carefully monitoring fiscal policy across key

countries that can affect global interest rates. Unsustainable

fiscal dynamics can trigger an accident in bond markets," they

said in a note.

In commodities, oil prices rose on Thursday to continue

recovering after a volatile month so far due to the conflict

between longtime rivals Israel and Iran.

Brent crude futures rose 0.37% to $67.93 a barrel,

while U.S. West Texas Intermediate crude (WTI) gained

0.45% to $65.21.

(Editing by Shri Navaratnam and Lincoln Feast.)