US Dollar Strengthens Amid Trump’s Greenland Reversal: What It Means for Global Investors and Businesses
The US dollar maintained its overnight gains against major currencies on Thursday following President Donald Trump’s retreat from tariff threats against several European NATO countries and his firm rejection of military action to assert control over Greenland.
The Australian dollar surged to a 15-month peak, boosted by improved market sentiment and surprising data indicating a decline in the unemployment rate.
Meanwhile, the Japanese yen remained under pressure, hovering near last week’s historic low against the euro after Prime Minister Sanae Takaichi called a snap election and pledged a more accommodative fiscal policy. The Bank of Japan commenced a two-day policy meeting on Thursday, with expectations that no changes will be made following last month’s rate hike.
Trump’s earlier warnings to impose tariffs on allied nations opposing his Greenland plans had unsettled markets, triggering a sell-off in US assets. However, his remarks at the Davos forum on Wednesday, where he ruled out military intervention, helped ease investor concerns.
He announced that a framework agreement had been reached with NATO regarding Greenland, though he did not provide specifics and confirmed that tariffs would not be implemented.
The dollar remained steady at $1.1690 against the euro after rebounding 0.35% in the previous session and eased slightly to 0.7942 Swiss francs following a notable overnight increase.
Gold prices softened and stock markets recovered after Trump abandoned tariff threats and dismissed the possibility of seizing Greenland by force.
Economists continue to assess distortions caused by last autumn’s US lockdowns, focusing now on the October and November PCE inflation data scheduled for release later in the session.
The Australian dollar climbed as much as 0.6% to $0.6802, marking its highest level since October 2024 and extending a four-day winning streak. With December’s unemployment rate hitting a seven-month low and employment figures surpassing expectations, markets assign a more than 50% likelihood to a rate hike next month.
The Australian dollar also rose nearly 1% to 108.03 yen, its strongest level since July 2024.
The yen weakened by 0.3% to 185.56 per euro, matching last week’s record low, and declined 0.2% to 158.68 per US dollar, approaching levels that traditionally trigger intervention.
Analysts anticipate a hawkish stance from the Bank of Japan in Friday’s policy announcement, aimed at stabilizing the yen, while gains in long-term Japanese government bonds reflect expectations of measures to curb rising yields.
— Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The easing of US tariff threats and geopolitical tensions signals stability in global trade and investment sentiment, benefiting Oman’s export-driven and investment-linked sectors. However, currency fluctuations, particularly with the US dollar and yen, create both risks and opportunities for Oman-based businesses engaged in international trade or foreign investments. Smart investors should monitor central bank policies globally and consider diversifying currency exposure to mitigate volatility while capitalizing on improved risk appetite in markets.
