The US dollar weakened at the start of the week after tensions between the United States and the European Union escalated over the Greenland issue. Markets assessed that the political conflict, which has escalated into tariffs, has the potential to disrupt transatlantic trade relations, increasing pressure on the dollar.

The US Dollar Index (DXY) fell around 0.25% and moved between 99.10 and 99.15. This weakening occurred as investors began reducing exposure to dollar-based assets and shifting to currencies perceived as safer amid growing geopolitical uncertainty.

The main trigger came from Donald Trump's statement threatening 10% tariffs on imports from several European Union countries. The tariffs are expected to take effect on February 1, in response to Europe's rejection of the US plan to "purchase" Greenland.

From the European side, European Commission President Ursula von der Leyen warned that US action could undermine territorial integrity and sovereignty, as well as damage transatlantic relations. She assessed that such an escalation risks triggering a worsening "spiral" if both sides pressure each other.

In the longer term, the market is also concerned about the side effects: if US European relations continue to erode, Europe could increasingly seek alternative payment mechanisms or diversify trade transactions. If this trend intensifies, the dollar's position as the dominant currency could gradually erode.

Pressure on the dollar also comes from monetary policy. Fed official Michelle Bowman signaled a dovish stance, stating that the central bank needs to be ready to lower interest rates toward neutral levels, as labor market conditions are still considered fragile. This combination of geopolitical tensions and potential interest rate cuts is causing the dollar to increasingly lose steam. (asd) [sma]

Source : Newsmaker.id