SINGAPORE: The dollar retreated for a second day in Asian trading on Tuesday after threats from the White House towards the European Union over the future of Greenland triggered a broad selloff across U.S. stocks and government bonds.
The dollar index, which measures the greenback's strength against a basket of six currencies, fell as much as 0.3% to 98.841 - reaching its lowest level since January 12 - as investors worried about exposure to U.S. markets.
On Monday, U.S. President Donald Trump's renewed tariff threats against European allies triggered 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. U.S. markets will return on Tuesday following a public holiday for Martin Luther King Jr. Day.
Investors were dumping dollar assets on "fears of prolonged uncertainty, strained alliances, a loss of confidence in U.S. leadership, potential retaliation and an acceleration of de-dollarisation trends," said Tony Sycamore, market analyst at IG in Sydney.
"While there are hopes the U.S. 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 up 0.2% at $1.1663, while the British pound tacked on 0.1% to $1.3435.
"The market still doubts tariff implementation," analysts from OCBC wrote in a research note. "For now, potential de-dollarisation flows outweigh the EUR and GBP negative impact of possible euro zone and UK growth downgrades should Trump’s tariffs materialise."
The yen slid 0.2% against the dollar as a selloff in Japanese government bond markets accelerated after Japanese Prime Minister Sanae Takaichi called snap elections for February 8.
Her pledge to suspend an 8% sales tax on food for two years has focused attention on the country's shaky public finances, though the Japanese currency was little changed after a sale of 20-year government bonds saw slack demand at an auction on Tuesday. The dollar was up 0.2% at 158.45 yen.
Against the Chinese yuan trading offshore in Hong Kong , the dollar was steady at 6.9548 yuan, the weakest level for the greenback 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.
Indonesia's rupiah weakened 0.2% to a record low of 16,985 against the dollar as investors fretted about the country's central bank independence after President Prabowo Subianto nominated his nephew to join Bank Indonesia's Board of Governors.
Indonesia's finance minister said on Tuesday that the government would ensure the central bank's independence and not use its funds to pay for its policy programmes.
The Australian dollar advanced as much as 0.4% to $0.6741, approaching its strongest since October 2024, while the New Zealand dollar climbed 0.6% to $0.5835, its highest level of this year.
Bitcoin slumped 2.2% to $90,889.78, while ether fell 2.9% to $3,117.03. - Reuters
