Market News
Dollar slides, investors snap up safe havens as Trump threatens Europe tariffs - REUTERS
By Amanda Cooper
LONDON, Jan 19 (Reuters) - The dollar fell 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 over the weekend said 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 United States is allowed to buy Greenland.
European Union ambassadors agreed on Sunday to step up their efforts to dissuade Trump from imposing tariffs, while also preparing retaliatory measures should the duties go ahead, EU diplomats said.
After dropping briefly in overnight trading, European currencies including the euro, pound and Scandinavian crowns rose. The Swiss franc, a classic safe-haven, headed for its largest daily rise against the dollar in a month.
EURO BENEFITS FROM DOLLAR AVERSION
The euro reversed course from the start of Asian trading to rise 0.2% to $1.1627 by mid-morning in Europe, while the pound similarly recovered, rising 0.1% to $1.339.
"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 United States."
Investors dumped the dollar after Trump unveiled sweeping tariffs on the world last April, triggering a crisis of confidence in U.S. assets.
While some movement of capital out of the dollar was evident on Monday, most notably with the hefty gains in the safe-haven Swiss franc, analysts said in the event of a greater escalation in tensions, investors would most likely flock back to the U.S. currency.
"The market has been understandably anxious about the dollar's decline in value since last April. But I would really caution against assuming that the dollar's safe-haven status is gone," Rabobank chief currency strategist Jane Foley said.
"Even if non-U.S. investors decided to take their money out, where would they go? Other markets aren't big enough to maintain that. The sheer size of the (U.S.) market means that there is always going to be some safe-haven value associated with U.S. assets," she said.
YEN STILL IN INTERVENTION ZONE
The dollar fell 0.5% on the day against the Swiss franc at 0.7982 francs, while marginally dipping against the Japanese yen, another non-U.S. safe haven of choice, to 158.055 yen.
Domestic Japanese politics have hampered the yen in recent weeks, with a looming snap election raising expectations of greater fiscal stimulus. With the yen trading around its weakest since mid-2024, the risk of official intervention is high, not least because of the verbal warnings from Tokyo in the last couple of weeks.
"We still remain sceptical of intervention being successful on a sustained basis and would need fundamental supportive yen factors to play out as well. Moves in yen today are certainly more contained," Derek Halpenny, MUFG's head of research for global markets EMEA, said in a note.
Cryptocurrencies, which often act as a barometer of investor risk sentiment, tumbled, leaving bitcoin down nearly 3% at $92,740, while ether sank more than 4% to $3,205.
Data on Monday showed China's economy grew 5.0% last year, meeting the government's target by seizing a record share of global demand for goods to offset weak domestic consumption.
The onshore yuan climbed to a 32-month peak of 6.9630 per dollar, shrugging off the mixed data, after China's central bank set its strongest daily fixing in more than two years.
(Additional reporting by Rae Wee in Singapore; Editing by Shri Navaratnam, Clarence Fernandez and Christian Schmollinger)
