The US dollar fell on Monday as investors, unnerved by the latest tariff threats issued by US President Donald Trump against Europe over Greenland, rushed to buy the Japanese yen and the Swiss franc in a broad risk-off move across markets.

Over the weekend, Trump said he would impose additional tariffs of 10% starting February 1 on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, until the United States is allowed to purchase Greenland.

European Union ambassadors agreed on Sunday to step up efforts to dissuade Trump from imposing the tariffs, while at the same time preparing retaliatory measures should the tariffs go ahead, according to EU diplomats.

After briefly dipping in overnight trading, European currencies rebounded, including the euro, sterling, and Nordic currencies. The Swiss franc, a traditional safe haven, was also on track for its biggest daily gain against the dollar in a month.

Euro benefits from dollar aversion

The euro reversed course from early Asian trading to rise 0.2% to $1.1627 by mid-morning European trade, while sterling recovered in a similar fashion, up 0.1% to $1.339.

Khoon Goh, head of Asia research at ANZ, said that tariff threats would normally be expected to weaken the euro.

“But as we also saw last year, when so-called ‘Liberation Day’ tariffs were imposed, the impact in foreign exchange markets actually tended to be dollar weakness whenever US policy uncertainty increased,” he added.

Investors had previously dumped the dollar after Trump unveiled sweeping global tariffs in April, triggering a crisis of confidence in US assets.

Although some capital shifted out of the dollar on Monday — most notably into the Swiss franc as a safe haven — analysts said that a sharper escalation in tensions would likely drive investors back toward the US currency.

Jane Foley, head of FX strategy at Rabobank, said it was understandable for markets to be concerned about the dollar’s slide since April, but warned against assuming that the dollar’s safe-haven status had ended.

“Even if investors outside the US decide to pull money out, where will they go?” she said. “Other markets are not large enough to absorb it. The sheer size of the US market means there is always a safe-haven value attached to US assets.”

Yen remains in intervention territory

The dollar fell 0.5% on the day against the Swiss franc to 0.7982, while edging slightly lower against the Japanese yen, another non-US safe haven, to 158.055 yen.

Domestic politics in Japan have weighed on the yen in recent weeks, as the prospect of an early election has raised expectations of additional fiscal stimulus. With the yen trading near its weakest levels since mid-2024, the risk of official intervention has increased, particularly following verbal warnings from Tokyo over the past two weeks.

Derek Halpenny, head of global markets research for EMEA at MUFG, said in a note that the bank remained sceptical about the ability of intervention to succeed on a sustained basis without supportive fundamentals.

“The moves in the yen today are certainly more limited,” he added.

Cryptocurrencies, often seen as a gauge of risk appetite, declined, with Bitcoin down about 3% at $92,740, while Ethereum fell more than 4% to $3,205.

Data released on Monday showed that China’s economy grew by 5.0% last year, meeting the government’s target, helped by a record share of global goods demand that offset weak domestic consumption.

The yuan in onshore trading rose to a 32-month high of 6.9630 per dollar, shrugging off mixed data, after China’s central bank set its strongest daily fixing in more than two years.

Gold prices rose in European markets on Monday, resuming gains that had paused for two days, posting a fresh record high and moving sharply closer to trading above $4,700 per ounce for the first time ever, supported by the current pullback in the US dollar.

Investor demand for safe-haven assets strengthened amid rising tensions after US President Donald Trump threatened to impose additional tariffs on European countries over the dispute surrounding Greenland.

Price Overview

• Gold prices today: Gold prices jumped by about 2.05% to $4,690.80, the highest level on record, from the session opening level of $4,596.69. Prices recorded a low at $4,596.69.

• At Friday’s settlement, the precious metal fell by 0.4%, marking a second consecutive daily loss, due to correction and profit-taking.

• Gold prices rose by 1.95% last week, recording a second straight weekly gain amid escalating global geopolitical tensions.

The US dollar

The dollar index fell by 0.3% on Monday, moving away from a six-week high and reflecting broader weakness in the US currency against a basket of major and secondary currencies.

Beyond profit-taking, the US dollar has come under pressure due to investor unease following President Trump’s threats to impose additional tariffs on Europe.

As is well known, a weaker US dollar makes dollar-priced gold bullion more attractive to holders of other currencies.

Trump’s tariff threats

Over the weekend, Trump said he would impose an additional 10% tariff starting February 1 on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, until the United States is allowed to purchase Greenland.

Major European Union countries on Sunday condemned the tariff threats over Greenland, describing them as blackmail. France proposed responding with a set of unprecedented economic countermeasures.

EU diplomats said the bloc’s ambassadors reached a preliminary agreement on Sunday to intensify efforts aimed at dissuading Trump from imposing tariffs on European allies.

US interest rates

• According to the CME FedWatch tool from the CME Group, pricing for the probability of keeping US interest rates unchanged at the January 2026 meeting currently stands at 95%, while pricing for a 25-basis-point rate cut remains at 5%.

• Investors are currently pricing in two US interest rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

• To reprice these expectations, investors are closely monitoring upcoming US economic data releases.

Outlook for gold

Matt Simpson, Senior Analyst at StoneX, said that geopolitical tensions have given gold investors an additional tailwind, pushing the yellow metal to fresh record levels.

Simpson added that with Trump adding tariffs to the equation, it has become clear that his threat over Greenland is real, and that markets may be one step closer to the erosion of NATO cohesion and deeper political imbalances within Europe.

SPDR fund

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by about 10.87 metric tons on Thursday, marking a second consecutive daily increase and the largest single-day inflow since December 22, lifting total holdings to 1,085.67 metric tons — the highest level since May 3, 2022.

The euro rose in European markets on Monday at the start of the week against a basket of global currencies, beginning to recover from a two-month low hit earlier in Asian trading against the US dollar. The move was supported by negative pressure on the US currency after President Donald Trump threatened to impose tariffs on Europe as part of efforts to take control of Greenland.

With inflationary pressures on policymakers at the European Central Bank easing, expectations for at least one European interest rate cut this year have strengthened. To reprice these expectations, markets are awaiting further economic data from the euro area.

Price Overview

• Euro exchange rate today: The euro rose by about 0.4% against the dollar to $1.1638, from Friday’s closing level of $1.1595, after touching a low of $1.1576 — the lowest since November 28.

• The euro ended Friday’s trading down 0.1% against the dollar, marking a second consecutive daily loss, following the release of strong US economic data.

• Last week, the euro lost 0.35% against the dollar, recording a third straight weekly loss, amid rising expectations for European interest rate cuts this year.

The US dollar

The dollar index fell by 0.3% on Monday, moving away from a six-week high and reflecting broad weakness in the US currency against a basket of major and secondary currencies.

Beyond profit-taking, the dollar has come under pressure due to investor concerns following threats by US President Donald Trump to impose additional tariffs on Europe.

Over the weekend, Trump said he would impose an additional 10% tariff on imports starting February 1 on goods coming from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, until the United States is allowed to purchase Greenland.

Major European Union countries on Sunday condemned the tariff threats over Greenland, describing them as blackmail. France proposed responding with a set of economic countermeasures that have not previously been used.

European interest rates

• Recent data from Europe showed a slowdown in headline inflation in December, underscoring easing inflationary pressures on the European Central Bank.

• Following those data, money-market pricing for the probability of the ECB cutting European interest rates by about 25 basis points in February rose from 10% to 25%.

• Traders revised their expectations from the ECB keeping interest rates unchanged throughout the year to at least one 25-basis-point rate cut.

• To reprice these expectations, investors are awaiting further euro-area economic data on inflation, unemployment, and wages.

Views and analysis

Khoon Goh, Head of Asia Research at ANZ, said that tariff threats would normally be expected to weaken the euro. However, as seen last year as well, when “Liberation Day” tariffs were imposed, the impact in foreign exchange markets tended to skew more toward dollar weakness as uncertainty around US policy increased.

Goh added that while some may argue tariffs threaten Europe, the US dollar is bearing the greater burden, as markets are pricing in a higher political risk premium associated with the US currency.

The Japanese yen rose in Asian markets on Monday against a basket of major and secondary currencies, extending its gains for a second consecutive day against the US dollar and hitting a two-week high, supported by warnings and actions from Japanese authorities aimed at backing the struggling local currency.

The advance was also supported by reports that several officials at the Bank of Japan favor raising interest rates again, with some not ruling out a hike as early as April, as the yen’s depreciation threatens to exacerbate mounting inflationary pressures.

Price Overview

• Japanese yen exchange rate today: The dollar fell against the yen by 0.4% to ¥157.43, its lowest level since January 9, from Friday’s close at ¥158.06. The dollar recorded an intraday high at ¥157.95.

• The yen ended Friday’s trading up 0.35% against the dollar, marking its second gain in the past three days, as part of a recovery from an 18-month low at ¥159.45 per dollar.

• Beyond bargain buying, the yen also rose on hints of coordinated intervention between Japan and the United States to support the weakened currency.

Japanese authorities

Japan’s Finance Minister Satsuki Katayama said on Friday that the government “will not rule out any options” to deal with excessive and unjustified moves in the foreign exchange market, in a clear signal of the possibility of direct intervention to support the yen.

Katayama said the yen’s current weakness does not reflect Japan’s economic fundamentals and is hurting household purchasing power. She added that Japan remains in close contact with its international partners, especially the United States, to ensure that any action in currency markets is consistent with international understandings on exchange rate stability.

Speaking at her regular press conference, Katayama said the joint statement signed with the United States last September “was extremely important” and included provisions related to foreign exchange intervention.

Felix Ryan, an FX strategist at ANZ, said that nearing the intervention stage is often accompanied by statements from Japan’s Ministry of Finance or government officials regarding yen levels, or by inquiries made to counterparties.

Ryan added that the significance of such statements depends mainly on the dollar-yen level, as well as the speed of its movements over a 24-hour period.

Japanese interest rates

• Four sources familiar with the matter told Reuters that some monetary policy officials at the Bank of Japan see scope for raising interest rates sooner than markets currently expect.

• These sources point to a potential rate hike decision at the April meeting, given concerns that the continued decline of the yen could intensify inflationary pressures.

• The sources, who asked not to be identified because they are not authorized to speak to the media, said the Bank of Japan does not rule out early action if sufficient evidence emerges that the economy can achieve the 2% inflation target in a sustainable manner.

• Economists told Reuters that the Bank of Japan would most likely prefer to wait until July before raising the key interest rate again, with more than 75% expecting it to rise to 1% or more by September.

• Pricing for the probability of the Japanese central bank raising interest rates by a quarter percentage point at the January meeting remains steady below 10%.

• The Bank of Japan meets on Thursday and Friday this week to review economic developments and determine appropriate monetary tools for this sensitive phase facing the world’s fourth-largest economy.