The U.S. dollar weakened on Monday as investors moved into safe-haven currencies, led by the Swiss franc. The shift followed renewed tariff threats from Donald Trump, which triggered a broad risk-off mood across global markets.
Over the weekend, Trump said the United States would introduce an additional 10% import tariff from February 1 on goods from several European countries, including Denmark, Germany, France, and the United Kingdom. The levies would remain in place until the U.S. is allowed to purchase Greenland, according to his comments.
European leaders responded by stepping up diplomatic efforts to prevent a trade war. At the same time, they began preparing retaliatory measures should the tariffs be implemented.
After an initial dip in Asian trading, European currencies recovered. The euro, pound, and Scandinavian currencies all strengthened, while the Swiss franc, a traditional safe haven, headed for its largest one-day gain against the dollar in a month.
Euro Gains as Investors Cut Dollar Exposure
The euro rose 0.3% to $1.1638, while sterling climbed 0.34% to $1.342. The Norwegian crown also advanced, leaving the dollar down 0.2% on the day.
Investors initially sold the dollar in response to the tariff threats, echoing the reaction seen last April when Trump announced sweeping global tariffs that undermined confidence in U.S. assets.
While some capital flowed out of the dollar, analysts cautioned that a deeper escalation could eventually support the U.S. currency, particularly if Europe bears the brunt of the economic fallout.
Kit Juckes, chief FX strategist at Société Générale, said a prolonged trade conflict may ultimately hurt Europe more than the United States, given Europe’s heavier reliance on exports to the U.S. market.
Yen Near Intervention Levels
The dollar fell 0.7% against the Swiss franc and slipped 0.14% versus the Japanese yen, which also benefits from safe-haven demand.
Recent political uncertainty in Japan has weighed on the yen, with expectations of increased fiscal spending ahead of a potential snap election. With the currency hovering near its weakest levels since mid-2024, the risk of official intervention remains elevated following repeated warnings from Tokyo.
Derek Halpenny, head of global markets research EMEA at MUFG, said intervention is unlikely to be effective without stronger underlying support for the yen, adding that current moves remain relatively contained.
Risk sentiment deteriorated further in digital assets. Cryptocurrencies fell sharply, reflecting reduced appetite for riskier investments.
Meanwhile, economic data showed China’s economy grew 5.0% last year, meeting the government’s target. Growth was supported by strong exports, which offset weak domestic consumption.
The onshore yuan climbed to a 32-month high, supported by the strongest daily fixing in more than two years set by People’s Bank of China, despite the mixed economic signals.
