The U.S. dollar weakened on Monday as investors reacted to fresh tariff threats from U.S. President Donald Trump targeting Europe over Greenland. Heightened uncertainty pushed markets into a risk-averse stance, driving demand for traditional safe havens such as the Japanese yen and the Swiss franc.
Over the weekend, Trump said the United States would impose an additional 10% import tariff from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom, unless Washington is allowed to purchase Greenland.
Major European Union countries condemned the move on Sunday, with France describing the tariff threat as economic coercion and floating the possibility of retaliatory measures not previously used.
In early Asian trading, the immediate reaction in currency markets was a selloff in the euro and the British pound. The euro slid to a seven-week low of $1.1572, while sterling fell to a one-month trough of $1.3321.
As trading progressed, both currencies recovered from their lows as attention shifted to the broader implications of Trump’s tariff escalation for the U.S. dollar itself. The euro rebounded 0.3% to $1.1634, while the pound regained 0.16% to trade at $1.3397.
Khoon Goh, head of Asia research at ANZ, said that while tariffs would normally be expected to weaken the euro, recent history suggests the opposite effect. He noted that periods of heightened policy uncertainty originating in the United States have repeatedly resulted in dollar weakness rather than strength.
Investors had already reduced exposure to the greenback after Trump introduced sweeping global tariffs last April, sparking concerns over the safety of U.S. assets. A similar pattern emerged on Monday, with the dollar falling 0.45% against the Swiss franc to 0.7985 and slipping 0.21% against the yen to 157.77.
Yen gains were partly limited by domestic political factors, as the prospect of a snap election in Japan increased expectations for fiscal stimulus, weighing on the currency and government bonds.
The dollar index edged down to 99.11. Goh added that although Europe is the direct target of the tariff threats, markets appear to be pricing higher political risk into the dollar itself.
Risk aversion was also evident in digital assets. Bitcoin fell 3% to $92,563.09, while ether dropped more than 4% to $3,200.99.
In Asia, fresh data showed that China’s economy expanded by 5.0% last year, meeting the government’s official growth target by capturing a record share of global goods demand despite weak domestic consumption.
Vincent Chan, China strategist at Aletheia Capital, said a closer look at the data suggested the economy weakened toward the end of the year, with investment slowing sharply and consumption remaining subdued.
Despite the mixed outlook, the onshore yuan climbed to a fresh 32-month high of 6.9630 per dollar after the People’s Bank of China set its strongest daily fixing in more than two years.
The Australian dollar, often used as a proxy for the yuan, was little changed, edging up 0.06% to $0.6695, while the New Zealand dollar gained 0.42% to $0.5776.
