Dollar edges up after Trump rules out military action in Greenland

US dollar

• Dollar rises from 3-week lows after Trump's Davos speech and tariff threats
• Euro and Swiss franc fall against dollar; Swedish krona hits 4-year high
• Yen weakens as Japan faces elections and possible fiscal policy changes

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The dollar edged up from three-week lows against the euro and the Swiss franc on Wednesday as investors digested U.S. President Donald Trump’s speech at Davos, after his tariff threats triggered a broad selloff in U.S. assets.

The dollar ticked slightly higher against major pairs following Trump's speech, where he ruled out military action in Greenland, but said he was seeking immediate negotiations to discuss a deal to acquire the northern island.

The euro was down 0.17% at $1.17 , having risen more than 1% in the last two sessions. It hit $1.1770 on Tuesday, its highest level since December 30.

The safe-haven Swiss franc was down 0.47% to 0.7934 per dollar, after gaining about 1.5% between Monday and Tuesday.

"We're clearly not at the end of this saga, but any use of force would cause an irreparable schism between the U.S. and Europe," said Adam Button, chief currency analyst at investingLive.

"It doesn't sound like [Trump] is in Davos to make any real ultimatums."

French President Emmanuel Macron has pushed for the EU to consider the first use of its Anti-Coercion Instrument, informally known as the "trade bazooka", which could limit U.S. access to public tenders or restrict trade in services such as tech platforms. Macron said on Tuesday it was "crazy" it had gone that far.

An announcement by Danish pension fund AkademikerPension on Tuesday that it would sell its roughly $100 million holding of U.S. Treasuries by the end of the month added to speculation about further foreign investor selling.

NATO Secretary General Mark Rutte said on Wednesday he was working "behind the scenes" to address tensions between the U.S. and its European allies.

The Swedish krona hit a fresh 4-year high versus the dollar at 10.099 as investors favored countries with low debt levels.

YEN ON THE ROPES, INTERVENTION TERRITORY IN FOCUS

The dollar was steady against the Japanese currency, which faced its own selloff after Prime Minister Sanae Takaichi on Monday called snap elections for February 8 and pledged measures to loosen fiscal policy.

The yen was slightly lower against the dollar at 158.255. Investors closely watched Japanese government bonds (JGBs) which were hit hard early this week, but rebounded on Wednesday.

"The absence of strategic buyers in this segment has made price action more sensitive and amplified volatility. I expect this environment of elevated volatility to persist through 2026," said Vincent Chung, co-portfolio manager at T. Rowe Price.

"A further sell-off in JGBs would seem to drag the dollar/yen towards intervention territory at 159/160," said Chris Turner, global head of markets at ING.

"However, if the yen sell-off is a self-inflicted wound from the Japanese government policy, the effectiveness of intervention will become increasingly questionable."