The US Dollar slipped for a second straight session in Asian markets on Tuesday, after White House threats aimed at the European Union over Greenland’s future sparked widespread selling in US equities and Treasuries.
The Dollar index, which tracks the greenback against six major currencies, dropped as much as 0.3% to 98.841, its weakest level since 12th January, as investors grew increasingly cautious about US market exposure.
On Monday, renewed tariff threats by US President Donald Trump toward European allies reignited the so-called “Sell America” trade that first surfaced after last April’s Liberation Day tariff announcement, sending US equities, Treasury bonds and the Dollar lower in tandem.
US markets are set to reopen on Tuesday after being closed for the Martin Luther King Jr. public holiday.
Investors were shedding Dollar-denominated assets amid concerns over sustained uncertainty, deteriorating alliances, waning confidence in US leadership, the risk of retaliatory measures and a faster shift toward de-dollarisation, according to Tony Sycamore, market analyst at IG in Sydney.
“While there are hopes the US administration may soon de-escalate these threats, as it has with prior tariff announcements, it is clear that securing Greenland remains a core national security objective for the current administration,” he said.
The Euro climbed 0.2% to $1.1663, while Sterling edged up 0.1% to $1.3435.
The market remains sceptical that the tariffs will actually be implemented. For now, concerns over potential de-dollarisation are outweighing any negative impact on the Euro and Pound from possible growth downgrades in the eurozone and UK if Trump’s tariffs were to take effect.
Elsewhere, the Yen fell 0.2% against the Dollar as a selloff in Japanese government bonds picked up pace following Prime Minister Sanae Takaichi’s announcement of snap elections for 8th February.
Her promise to suspend the 8% sales tax on food for two years has drawn attention to Japan’s fragile public finances. Despite weak demand at Tuesday’s 20-year bond auction, the Yen remained largely steady, with the Dollar rising 0.2% to 158.45 Yen.
In addition, the Dollar held steady at 6.9548 Yuan against the Chinese Yuan in offshore Hong Kong trading, marking its weakest level since May 2023.
Analysts surveyed by Reuters had expected the People’s Bank of China to keep benchmark lending rates unchanged for the eighth consecutive month in January, which it did.