Dollar lower as investors reignite ‘Sell America’ trade

NEW YORK – The dollar was set for its largest daily fall in over a month on Tuesday, after White House threats to Europe over the future of Greenland triggered a broad selloff across US stocks and government bonds, and drove the euro and the pound higher.

The dollar index, which measures the US currency’s performance against a basket of six others, fell as much as 0.7% – marking its biggest one-day drop since mid-December – as investors worried about exposure to US markets.

On Monday, US President Donald Trump’s renewed tariff threats against European allies prompted a repeat of the so-called “Sell America” trade that emerged after last year’s “Liberation Day” tariff announcement in April, with stocks, Treasury bonds and the dollar all declining.

Investors were dumping dollar assets on “fears of prolonged uncertainty, strained alliances, a loss of confidence in US leadership, potential retaliation and an acceleration of de-dollarization trends,” said Tony Sycamore, market analyst at IG in Sydney.

“While there are hopes the US administration may soon de-escalate these threats, as it has with prior tariff announcements, it is clear that securing Greenland remains a core national security objective for the current administration,” he added.

The euro was last up 0.57% at USD 1.1711, while the pound gained 0.01% to trade at USD 1.34. Sterling got a minor additional lift earlier in the session from UK labor market data that showed unemployment remained at a five-year high, but also offered positive signs such as vacancy numbers plateauing.

The S&P 500 and Nasdaq Composite dropped to their lowest points in a month on Tuesday, as investors returned from the US long weekend and reacted negatively to the fresh tariff threats.

The risk-off wave, which also pushed the Dow Jones Industrial Average to its lowest intraday level since January 5, left US Treasuries wobbling under renewed selling pressure.

“We knew that some stock markets like the U.S … were all at elevated, stretched levels. So who knew what the pinprick was going to be? But we found it,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets.

Weekly data from the US markets regulator show investors have trimmed their largest long, or bullish, holdings of euro futures modestly, but that position is still close to its largest since mid-2023, which in theory means there could be appetite to sell.

The yen, which slid overnight as a selloff in Japanese government bond markets accelerated, picked up as European trading got underway, leaving the dollar at 158.280.

Japanese Prime Minister Sanae Takaichi has called snap elections for February 8 and has pledged a wave of measures to loosen fiscal policy, which has unnerved investors in Japanese sovereign bonds about the country’s fragile public finances.

The Swiss franc, a key beneficiary of any safe-haven flows, strengthened for a third straight day, leaving the dollar down 0.88% at 0.7902 francs.

Against the Chinese yuan trading offshore in Hong Kong, the dollar was steady at 6.9576 yuan, its weakest since May 2023. The People’s Bank of China left benchmark lending rates unchanged for an eighth straight month in January, as expected by analysts polled by Reuters.

The Australian dollar was last up 0.27% to USD 0.673, while the New Zealand dollar climbed 0.54% to USD 0.583, its highest level this year.

(Reporting by Hannah Lang in New York; additional reporting by Amanda Cooper in London and Gregor Stuart Hunter; Editing by Andrew Heavens, Emelia Sithole-Matarise, Mark Heinrich, and Andrea Ricci)