Dollar edges lower as Greenland concerns ease, data back in focus
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Jan 22 : The U.S. dollar fell slightly on Thursday ahead of key economic data, as the so‑called ‘Sell America’ trade faded after President Donald Trump dropped tariff threats and ruled out seizing Greenland by force.
The greenback recovered versus the euro on Wednesday on Trump’s remarks, after losing a bit less than 1 per cent between Monday and Tuesday.
The Australian dollar rose to a 15-month high, buoyed by data showing an unexpected decline in the jobless rate.
The yen remained under pressure after Japanese Prime Minister Sanae Takaichi this week called a snap election and pledged measures to loosen fiscal policy.
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Trump’s threat to levy tariffs on allied nations resisting his ambition to control Greenland had spooked markets, triggering a broad selloff of U.S. assets. Still, some analysts said there was little evidence of a real move out of the U.S. dollar.
"This whole argument about European investors selling U.S. assets is very hard to sustain," Bob Savage, head market strategist at BNY, said.
"This isn't a ‘sell America’ story, it's a risk‑management story," he added. "We’re just seeing more hedging because volatility has risen after being at very low levels at the end of last year."
US DATA BACK IN FOCUS
Gold prices were softer and stocks rebounded on Thursday. The dollar fell 0.10 per cent to $1.1698 per euro, following a 0.35 per cent rebound in the prior session. It weakened 0.25 per cent to 0.7932 Swiss francs, after leaping 0.7 per cent.
"From a European perspective, it is too early to rejoice," Volkmar Baur, forex strategist at Commerzbank, said.
Details of a framework for an agreement on Greenland were not yet known. However, "the most likely outcome is still that the next wave of excitement will pass us by after a brief period of volatility and that the market will refocus on central banks and interest rate differentials," he added.
Economists are only finally clearing the data haze left by last year's U.S. lockdown, and a key missing piece should fall into place later in the session when October and November PCE inflation estimates - the Federal Reserve's favourite gauge of inflation - are released.
AUSSIE SET FOR FOURTH STRAIGHT DAILY RISE
The Aussie jumped as much as 0.6 per cent to $0.6802, touching its strongest level since October 2024, and headed for a fourth straight daily gain, outperforming even as risk assets came under pressure earlier this week.
With December’s jobless rate hitting a seven‑month low and employment surging past expectations, markets now see the chances of a rate hike next month exceeding 50 per cent, compared with 29 per cent before the release.
"The strength of both the Australian and the New Zealand dollar is the latest example that speculation about moves in short-term interest rates in relation to central bank policy remains alive and well," Jane Foley, senior forex strategist at Rabobank, said.
The Aussie also vaulted as much as 1 per cent to its highest since July 2024 at 108.03 yen.
The Japanese currency weakened 0.2 per cent at 158.68 per U.S. dollar, near last week's 18-month trough of 159.45.
Analysts anticipate a hawkish tilt from the Bank of Japan at Friday’s policy meeting to help stabilise the yen, which is trading uncomfortably close to the 159-160 levels which are seen as intervention territory.
Japan's super-long-dated government bonds extended gains on Thursday on expectation that the finance ministry could take some measures to contain further rises in yields.
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