Donald Trump yesterday named former Federal Reserve official Kevin Warsh as the next chairman of the US central bank, ending weeks of uncertainty that has rattled markets.

The dollar rose while gold and silver plunged as traders breathed a 'sigh of relief'.

Warsh has called for 'regime change' at the Fed and backed Trump's calls for steep interest rate cuts – despite his background as a 'hawk' determined to keep down inflation.

But amid fears that the independence of the world's biggest central bank could be under threat, he was seen as more moderate and credible than other candidates such as Trump adviser Kevin Hassett.

Announcing the nomination with characteristic flourish, Trump said: 'I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best.

'On top of everything else, he is 'central casting', and he will never let you down.'

It comes after the Trump administration piled further pressure on the Fed, launching a criminal probe into a building renovation at the central bank.

Current Fed chairman Jerome Powell has claimed it is an attempt by the White House to intimidate rate-setters – though he shrugged off the President's fury this week, leaving rates on hold and indicating that there was little urgency to cut further.

The battle between Trump and Powell, combined with continued unpredictable foreign policy moves such as the President's threat to annex Greenland, has prompted a 'sell America' trade.

Earlier this week, the dollar fell to its lowest level against a basket of currencies for nearly four years. Yesterday, it rose sharply but was still 1.3 per cent lower over the year to date. The pound fell by a cent to just above $1.37.

Gold – a safe haven asset that had been boosted by the dollar's woes – also suffered a sharp retreat yesterday. Having soared close to $5,600 per ounce a day earlier, it fell below $4,900. Silver lost a quarter of its value in a day, plummeting from $120 on Thursday to less than $90.

Warsh, 55, is married to Jane Lauder, who is an heir to the Estee Lauder cosmetics empire and whose father Ronald Lauder is a former business school classmate of Trump's and a prominent Republican donor.

With a Wall Street background, Warsh served as a Fed governor from 2006 to 2011 during the Global Financial Crisis. He previously missed out on the Fed chairman job when Trump appointed Powell in 2017.

Stuart Clark, at Quilter, said: 'Investors will be breathing somewhat of a sigh of relief. This removes an unknown, and is certainly a lot more moderate of a pick than it could have been.'

Luke Bartholomew, deputy chief economist at Aberdeen Investments, said Warsh 'is a credible nomination'.