Emerging market assets rallied on Monday, a session characterized by a weakening U.S. dollar and the notable resurgence of the "sell America" trade. This development followed reports that the U.S. Department of Justice had served a subpoena to the Federal Reserve, threatening criminal prosecution. Most emerging market currencies advanced against the dollar, with the Mexican peso and the South African rand—often viewed as barometers for risk appetite—leading the gains. Concurrently, the Bloomberg Dollar Spot Index fell 0.2%, on track for its largest single-day decline since December 23 based on closing prices. The Trump administration's offensive against the Fed had escalated further. Fed Chair Jerome Powell stated that the central bank had received a grand jury subpoena, with the threat of criminal action; he indicated this move was aimed at undermining the Fed's independence in "setting interest rates based on evidence and economic conditions." This news exerted downward pressure on the dollar, prompting traders to pivot towards safe-haven assets like gold and silver, driving both to fresh record highs.

Alejandro Cuadrado, Global Head of FX Strategy at BBVA in New York, commented, "This intensifies the debate about the Fed's independence as we approach the announcement of the next Fed Chair nomination. It's negative for the dollar, as the narrative that 'political pressure will force the Fed to cut rates and adopt a more dovish stance' is likely to persist throughout the year." Marco Oviedo of XP Investimentos noted that a weaker dollar, combined with high carry trade potential, could help offset the impact of rising geopolitical risks in regions like Latin America, thereby supporting the resilience of emerging market currencies. "Given that uncertainty from geopolitical factors also remains persistent, I expect prices for some emerging market currencies to stabilize in the near term," the senior strategist added.

Stock markets also climbed in tandem, with the MSCI Emerging Markets Index rising 0.9% and approaching its historical peak. Alibaba (BABA.US), TENCENT (00700.HK), and Taiwan Semiconductor Manufacturing (TSM.US) were among the top gainers, following Wall Street's strong close on Friday. Hong Kong stocks advanced, while South Korean shares hit a new record, led by chipmakers and industrial stocks. The rally in Asian markets received an additional boost from comments by China's Minister of Industry and Information Technology, Li Lecheng, who stated in an interview that the Chinese government would accelerate the integration and application of digital technologies, further fueling enthusiasm for artificial intelligence-themed investments. Geoffrey Yu, Senior Strategist at BNY Mellon, observed, "The AI theme remains relatively solid, supported by long-term allocation intentions for both private and public projects."

Elsewhere, investors are closely monitoring the situation in Iran—where a potential overthrow of the government could trigger a restructuring of the global geopolitical landscape and volatility in energy markets. Meanwhile, Lebanese bond prices have climbed to their highest level since March 2020—a period when the country defaulted on approximately $30 billion of international debt; there is widespread optimism that proposed legislation aimed at unfreezing bank deposits will be a key positive step in alleviating the nation's financial distress.