The dollar fell on Monday, as investors piled into safe havens like the Swiss franc and gold, after US President Donald Trump’s latest tariff threats against Europe over Greenland sparked a broad risk-averse move across markets.
Demand for havens pushed gold up 1.6 per cent to $4,670 (€4,014) an ounce and silver 3.4 per cent higher, with both metals hitting record highs. Bitcoin and other cryptocurrencies retreated.
Mr Trump said over the weekend he would impose an additional 10 per cent import tariff from February 1st on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, until the US is allowed to buy Greenland.
European leaders were scrambling to avert a trade war and on Sunday agreed to intensify their efforts to dissuade Trump from imposing tariffs, while also preparing retaliatory measures should the duties go ahead.
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After dropping briefly in overnight trading, European currencies including the euro, UK pound and Scandinavian crowns rose. The Swiss franc, a classic safe-haven, headed for its largest daily rise against the dollar in a month.
The euro was up 0.3 per cent at $1.163 around midday in Europe, while the pound was up 0.27 per cent to $1.3415.
“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 US assets.
While some movement of capital out of the dollar was evident on Monday, most notably with the Swiss franc’s gains, analysts said a further escalation in tensions could see investors flock back to the US 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-US. 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 (US) market means that there is always going to be some safe-haven value associated with US assets,” she said.
Mr Trump’s latest threats pose a fresh test for stock markets, which have climbed to record highs on an AI-led rally after rebounding from the April selloff triggered by century-high US levies.
“The threat of tariffs against fellow NATO members adds a fresh dose of uncertainty to the international trade picture, keeping financial markets off balance,” said Tim Waterer, chief market analyst at KCM Trade. “Traders are taking a cautious stance, at least until we see how things play out this week.” - Bloomberg/Reuters
