SYDNEY, Jan 21, 2026, 21:20 AEDT
The Australian dollar climbed to 68 U.S. cents on Wednesday, its highest level since October 2024, as the U.S. dollar weakened following President Donald Trump’s renewed tariff threats linked to his attempt to acquire Greenland. “In a crisis, the Aussie can move four cents in a day,” Michael McCarthy, moomoo’s chief executive and market strategist, told The Nightly. (The Nightly)
This matters because investors are once again testing the so-called “Sell America” trade — offloading U.S. stocks, Treasuries, and the dollar all at once. That combo tends to push up U.S. borrowing costs and can ripple fast through global funding markets. In Asia, the dollar index dropped as much as 0.7%. The euro gained ground, and the Australian dollar hovered near $0.673. The Canadian dollar rose to about 72.31 U.S. cents, close to a two-week peak. (Reuters)
Wall Street, Europe, and Asia all saw a widespread selloff Tuesday, with the S&P 500 plunging 2.06%—its steepest single-day drop in three months. Traders grew uneasy over a Greenland-related dispute that could reignite a trade war with Europe. Wasif Latif, chief investment officer at Sarmaya Partners, noted the episode revealed “shifting market perceptions of common alliances.” (Reuters)
Market anxiety indicators rose but stopped short of panic territory, despite a barrage of troubling headlines. Michael Brown, a market analyst at Pepperstone, noted that the moves “feel” harsher than they actually are, blaming a prolonged period of calm for making investors edgy. (Reuters)
Gold, a go-to asset when politics get turbulent, smashed through $4,700 an ounce, hitting yet another record. Silver wasn’t far behind, briefly climbing above $95 for a new all-time high. “Gold has surged deeper into uncharted territory as investors hedge against rising political risk,” noted Fawad Razaqzada, market analyst at City Index and FOREX.com. (Reuters)
Signs of worry are creeping into long-term investment moves, not just short-term trades. Denmark’s AkademikerPension plans to offload its roughly $100 million stake in U.S. Treasuries by month’s end. Investment director Anders Schelde pointed to rising U.S. debt and political uncertainty as key reasons. (Reuters)
U.S. Treasury Secretary Scott Bessent dismissed worries about a foreign sell-off in Treasuries during remarks in Davos, saying “Denmark’s investment in the U.S. Treasury bonds … is irrelevant.” He added, “I’m not concerned at all.” He also told European critics to “take a deep breath” and hold off until they hear Trump’s case. (Reuters)
Australia’s second-largest pension fund is boosting its currency hedging to limit its U.S. dollar exposure amid a weaker outlook. Andrew Fisher, general manager of total portfolio management and resilience at Australian Retirement Trust, pointed out that markets have priced in around 50 basis points of U.S. rate cuts for 2026 – that’s half a percentage point – even as rates are set to climb in both Japan and Australia. (Reuters)
By about 0900 GMT Wednesday, the dollar had regained some ground against the euro and Swiss franc, as investors held back ahead of Trump’s Davos speech following a sharp selloff in U.S. assets the day before. Thierry Wizman, global forex and rates strategist at Macquarie Group, said the key now was whether any “common ground” could emerge—possibly involving a NATO-led joint administration of Greenland. (Reuters)
European Commission President Ursula von der Leyen announced the EU is crafting a package to bolster Arctic security, making it clear the bloc won’t entertain negotiations over Denmark’s and Greenland’s sovereignty. Speaking from Davos, U.S. Commerce Secretary Howard Lutnick cautioned the EU against retaliatory moves and predicted the spat would be resolved, calling it a temporary “kerfuffle.” (Reuters)
Markets remain unpredictable with many variables at play. Should Trump ease up on tariff threats or EU leaders opt to hold their ground, the dollar might rebound, pushing the Australian dollar down fast. On the flip side, if trade tensions worsen, slowing global growth could undercut commodity demand and weigh on Australia’s prospects—even if the dollar weakens.
Australian economists note that a weaker U.S. dollar may lower costs for U.S. travel and some imports. However, they caution that rising U.S. bond yields and an expanding trade conflict risk tightening financial conditions and dampening global demand, which could in turn impact Australia. “We should take it seriously,” said AMP chief economist Shane Oliver. Betashares chief economist David Bassanese added the situation could “ultimately backfire” on the United States. (SBS Australia)
Sweden faces immediate trade risks from the tariff threat. According to Sweden’s Board of Trade, exports to the U.S. could drop by as much as 28% if Trump’s proposed tariffs go ahead. The tariffs would begin at 10% on Feb. 1 and climb to 25% by June 1, unless a Greenland deal is finalized. (Reuters)
Some strategists are trying to turn the turmoil into opportunity. International Financing Review reported that big banks like Deutsche Bank, Goldman Sachs, Morgan Stanley, and Societe Generale have singled out the Australian dollar and Swedish krona as potential winners this year amid geopolitical tensions. The rationale? Strong fiscal positions could gain traction as investors look to diversify away from the U.S. “Fiscal positions are going to become more important,” said Rabobank’s Jane Foley. (Ifre)
