Precise Investors Editorial Team
Investors had dumped the dollar after Trump unveiled sweeping tariffs on the world last April, triggering a crisis of confidence in U.S. assets
The dollar dropped on Monday as investors unnerved by U.S. President Donald Trump’s latest tariff threats against Europe over Greenland piled into the safe-haven yen and Swiss franc, in a broad risk-averse move across markets.
Trump said over the weekend he would impose an additional 10% import tariff from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, until the US is allowed to buy Greenland.
Major European Union nations decried the Greenland tariff threats as blackmail on Sunday, with France proposing to respond with a range of previously untested economic countermeasures.
In the forex market, the reaction in early Asia trade was to sell the euro and sterling, pushing the currencies to a seven-week low of $1.1572 and a one-month trough of $1.3321, respectively.
As the trading day got underway, both bounced from their lows, however, with the dollar coming under pressure as investors assessed the longer-term implications of Trump’s latest move on the U.S. currency.
That helped the euro reverse its losses, gaining 0.3% to trade at $1.1634, while the British pound similarly recovered 0.16% to $1.3397.
Typically you would think tariffs being threatened would lead to a weaker euro, said Khoon Goh, head of Asia research at ANZ.
But, as we’ve seen last year as well, when the ‘Liberation Day’ tariffs were getting put in place, the impact in FX markets actually has been more towards dollar weakness every time there is heightened policy uncertainty emanating from the US, Goh said.
Investors had dumped the dollar after Trump unveiled sweeping tariffs on the world last April, triggering a crisis of confidence in U.S. assets.
A similar trend played out on Monday, as the U.S. currency slid 0.45% against the safe-haven Swiss franc to 0.7985, and was down 0.21% at 157.77 yen.
However, some yen gains were capped by domestic politics, with a looming snap election in Japan raising expectations of greater fiscal stimulus, in turn hurting its currency and bonds.
The dollar index eased slightly to 99.11.
While you would argue that the tariffs threaten Europe, in fact, it’s actually the dollar that is bearing the brunt of it, because I think markets are pricing in increased political risk premia on the U.S. dollar, Goh added.
Comments (0)
Average Rating: No ratings yet/5 (0 reviews)
No comments yet. Be the first to comment!