The U.S. dollar weakened for a second straight session during Asian trading on Tuesday, as renewed pressure from the White House toward the European Union over Greenland reignited risk aversion and sparked broad selling across U.S. equities and government bonds.
The dollar index, which tracks the greenback against a basket of six major currencies, slipped as much as 0.2% to 98.891—its lowest level since January 13—as investors grew increasingly cautious about exposure to U.S. assets.
On Monday, fresh tariff threats from Donald Trump against European allies revived the so-called “Sell America” trade that first appeared after last year’s Liberation Day tariff announcement in April. U.S. stocks, Treasuries, and the dollar all moved lower. U.S. markets were set to reopen on Tuesday following the Martin Luther King Jr. Day public holiday.
Market participants have been shedding dollar-denominated assets due to “concerns around prolonged uncertainty, strained alliances, waning confidence in U.S. leadership, the risk of retaliation, and an acceleration in de-dollarisation trends,” said Tony Sycamore, market analyst at IG in Sydney.
While some investors expect the U.S. administration to eventually scale back its rhetoric—as it has after previous tariff announcements—Sycamore noted that Greenland remains a central national security priority for the current leadership.
U.S. Treasury yields edged higher, with the 10-year note up 3.0 basis points at 4.2586%. Meanwhile, Fed funds futures indicate a roughly 95% chance that the Federal Reserve will keep interest rates unchanged at its two-day policy meeting next week, according to the CME Group FedWatch tool.
In currency markets, the euro rose 0.1% to $1.1658, while sterling also advanced 0.1% to $1.3437. Analysts at OCBC said markets remain skeptical that tariffs will ultimately be implemented, adding that potential de-dollarisation flows are currently outweighing concerns over possible growth downgrades in the euro zone and the U.K. should tariffs materialise.
Against the yen, the dollar slipped 0.1% to 157.905 after Japanese Prime Minister Sanae Takaichi called snap elections for February 8. Her proposal to suspend an 8% food sales tax for two years has drawn attention to Japan’s fragile public finances, although the yen showed little reaction after weak demand at a 20-year government bond auction.
The dollar also eased 0.1% against the offshore Chinese yuan to 6.9540, its weakest level since May 2023. The People’s Bank of China kept benchmark lending rates unchanged for an eighth consecutive month in January, in line with expectations from analysts surveyed by Reuters.
Indonesia’s rupiah fell to a record low of 16,985 per dollar as investor concerns grew over central bank independence following President Prabowo Subianto’s nomination of his nephew to Bank Indonesia’s board.
Elsewhere, the Australian dollar gained 0.2% to $0.6727, while the New Zealand dollar jumped 0.5% to $0.58265, its highest level so far this year.
In crypto markets, bitcoin slipped 0.6% to $92,336.99, while ether declined 0.8% to $3,186.86.
