Dollar edges lower as Greenland concerns ease; Aussie jumps after jobs data

By Hannah Lang and Stefano Rebaudo

Jan 22 (Reuters) – The U.S. dollar was lower on Thursday as the “sell America” trade faded after President Donald Trump dropped tariff threats and ruled out seizing Greenland by force, and was little changed by U.S. inflation data that was in line with market expectations.

New Personal Consumption Expenditures inflation data – the Federal Reserve’s preferred inflation gauge – were unveiled, showing that U.S. consumer spending increased solidly in October and November, likely keeping the economy on track for a third straight quarter of strong growth.

Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.5% after rising by the same margin in October, the Commerce Department’s Bureau of Economic Analysis said on Thursday. Economists polled by Reuters had forecast consumer spending increasing 0.5% in November.

AUSSIE BOOSTED TO 15-MONTH HIGH

The greenback recovered versus the euro on Wednesday on Trump’s remarks about Greenland, after losing a bit less than 1% between Monday and Tuesday. It was last down 0.35% to $1.1726 per euro, following a 0.35% rebound in the prior session. The dollar weakened 0.52% to 0.7913 Swiss francs.

The Australian dollar rose to a 15-month high, buoyed by data showing an unexpected decline in the jobless rate.

The yen remained under pressure after Japanese Prime Minister Sanae Takaichi this week called a snap election and pledged measures to loosen fiscal policy.

Trump’s threat to levy tariffs on allied nations resisting his ambition to control Greenland had spooked markets, triggering a broad selloff of U.S. assets. Still, some analysts said there was little evidence of a real move out of the U.S. dollar.

“This whole argument about European investors selling U.S. assets is very hard to sustain,” said Bob Savage, head market strategist at BNY.

“This isn’t a ‘sell America’ story, it’s a risk‑management story,” he added. “We’re just seeing more hedging because volatility has risen after being at very low levels at the end of last year.”

Details of a framework for an agreement on Greenland were not yet known. However, “the most likely outcome is still that the next wave of excitement will pass us by after a brief period of volatility and that the market will refocus on central banks and interest rate differentials,” Savage said.

AUSSIE SET FOR FOURTH STRAIGHT DAILY RISE

The Aussie was last up 0.83% to $0.6818, touching its strongest level since October 2024, and headed for a fourth straight daily gain, outperforming even as risk assets came under pressure this week.

“The strength of both the Australian and the New Zealand dollar is the latest example that speculation about moves in short-term interest rates in relation to central bank policy remains alive and well,” said Jane Foley, senior forex strategist at Rabobank.

The Japanese currency weakened 0.07% at 158.415 per U.S. dollar, near last week’s 18-month trough of 159.45. 

Analysts anticipate a hawkish tilt from the Bank of Japan at Friday’s policy meeting to help stabilise the yen, which is trading uncomfortably close to the 159-160 levels that are seen as intervention territory.

Japan’s super-long-dated government bonds extended gains on Thursday on the expectation that the finance ministry could take some measures to contain further rises in yields. 

(Reporting by Hannah Lang and Stefano Rebaudo; Editing by Christopher Cushing, Tom Hogue, Emelia Sithole-Matarise, Andrew Heavens, Rod Nickel)