The dollar declined on Monday, with investors moving into assets like the Swiss franc. This shift followed U.S. President Donald Trump's announcement over the weekend that he would impose an additional 10% import tariff starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain. The tariffs are linked to the U.S. desire to purchase Greenland.
European leaders have been working to avoid a trade war. On Sunday, they agreed to increase efforts to persuade Trump not to implement the tariffs. They are also preparing retaliatory measures if the duties proceed.
After a brief drop in overnight trading, European currencies including the euro, pound, and Scandinavian crowns rose. The Swiss franc, considered a classic safe-haven, was on track for its biggest daily gain against the dollar in a month.
Around midday in Europe, the euro was up 0.3% at $1.163. The pound rose 0.27% 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 sold the dollar after Trump introduced broad tariffs last April, which caused a crisis of confidence in U.S. assets.
Some movement of capital away from the dollar was visible on Monday, particularly with the Swiss franc's advance. Analysts noted that a further increase in tensions might lead investors to return 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," said Rabobank chief currency strategist Jane Foley. "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 added.
The dollar was down 0.5% at 0.7984 Swiss francs. It was slightly lower against the Japanese yen, another non-U.S. safe-haven, at 158 yen.
Domestic Japanese politics have weighed on the yen recently. A potential snap election has raised expectations of more fiscal stimulus. With the yen trading near its weakest level since mid-2024, the risk of official intervention is high. Tokyo has issued verbal warnings in recent 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," said Derek Halpenny, MUFG's head of research for global markets EMEA, in a note.
Cryptocurrencies, often seen as a gauge of investor risk sentiment, dropped sharply. Bitcoin fell 2.5% to $93,011. Ether declined 3.5% to $3,223.
Data released Monday showed China's economy grew 5.0% last year, meeting the government's target. It achieved this by capturing a record share of global goods demand to counter weak domestic consumption.
The onshore yuan rose to a 32-month high of 6.9630 per dollar. It ignored the mixed data after China's central bank set its strongest daily fixing in over two years.