US dollar buoyed by Trump’s Greenland about-face

The US dollar held on to overnight gains against major peers on Thursday after President Donald Trump walked back tariff threats against several European NATO nations and ruled out the use of force in his push for control of Greenland.
The Australian dollar climbed to a 15-month high, supported by improved risk sentiment and data showing an unexpected fall in the unemployment rate.
The yen remained under pressure, hovering near last week’s record low against the euro, after Japanese Prime Minister Sanae Takaichi called a snap election and pledged looser fiscal policy. The Bank of Japan began a two-day policy meeting on Thursday, with markets expecting no change after last month’s rate hike.
Trump’s earlier threats to impose tariffs on allied nations opposing his Greenland ambitions had rattled markets and triggered a sell-off in US assets. However, his comments in Davos on Wednesday ruling out military action helped calm investor nerves.
Trump said he had reached a framework for a deal with NATO over Greenland, though he provided no details and said tariffs would not be imposed.
The dollar was steady at $1.1690 per euro after rebounding 0.35% in the previous session, while easing slightly to 0.7942 Swiss francs after a sharp overnight rise.
Gold prices softened and stocks rebounded after Trump dropped tariff threats and ruled out taking Greenland by force.
Economists are still working through distortions from last autumn’s US lockdowns, with attention turning to October and November PCE inflation data due later in the session.
The Australian dollar rose as much as 0.6% to $0.6802, its strongest level since October 2024, heading for a fourth straight daily gain. With December’s unemployment rate hitting a seven-month low and employment beating forecasts, markets now see a greater than 50% chance of a rate hike next month.
The Aussie also jumped nearly 1% to 108.03 yen, the highest since July 2024.
The yen slipped 0.3% to 185.56 per euro, matching last week’s record low, and weakened 0.2% to 158.68 per US dollar, near intervention-sensitive levels.
Analysts expect a hawkish tilt from the Bank of Japan at Friday’s policy decision to help stabilise the currency, while gains in super-long Japanese government bonds reflected expectations of steps to curb rising yields.
— Reuters