FOREX-Dollar rises vs euro, Swiss Franc as investors await Trump speech

By Stefano Rebaudo and Kevin Buckland

Jan 21 (Reuters) - The dollar rose from three‑week lows against the euro and the Swiss franc on Wednesday as investors awaited U.S. President Donald Trump’s speech at Davos, after his tariff threats triggered a broad selloff in U.S. assets.

Growth will be the priority of the United States’ presidency of the Group of 20 industrialised nations, U.S. Treasury Secretary Scott Bessent said on Wednesday, after urging European partners to hold off until President Trump addresses them.

On Monday, the U.S. renewed tariff threats against European allies over Greenland prompted a repeat of the so-called "Sell America" trade that emerged following U.S. tariff announcements last April.

The euro rose more than 1% in the last two sessions and was last down 0.15% at $1.1710 on Wednesday. EUR=EBS It reached $1.1770 on Tuesday, its highest level since December 30.

The safe-haven Swiss franc CHF=EBS fell 0.30% to 0.7922 per dollar, after gaining about 1.5% between Monday and Tuesday.

"The next step in the 'Greenland or Bust' saga is to see whether a common ground, such as NATO joint administration of Greenland, can be reached, starting at Davos this week," said Thierry Wizman, global forex and rates strategist at Macquarie Group.

"Until that happens the so-called primacy of the U.S. remains at risk of further dissolution, and with it an upending of the geopolitical alignments that have upheld markets in recent years," he added, recalling that the European Union may resort to significant trade measures.

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.

YEN ON THE ROPES TOO

The yen has also been on the ropes after Japanese government bond yields jumped to record highs, as investors worried about fiscal largesse with Prime Minister Sanae Takaichi seeking to broaden her mandate in snap elections next month.

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

The longest tenors of Japanese government bonds were hit hardest, with the 40-year yield JP40YTN=JBTC spiking 27.5 basis points to a record-high 4.215% on Tuesday, although on Wednesday that eased slightly to 4.1%.

The yen traded at a record low of 200.19 per Swiss franc on Tuesday CHFJPY=, and remained close to that level on Wednesday, changing hands at 199.21.

Japan's currency languished at 184.90 per euro EURJPY=, very close to the record low of 185.575 from a week ago.

The Bank of Japan is due to decide monetary policy on Friday, but after hiking interest rates at its previous meeting in January, no change is expected.

"The communication at this meeting is likely to maintain a somewhat hawkish stance," Mizuho Securities strategists wrote in a research note.

The Chinese yuan CNY=CFXS weakened 0.1% to 6.9659 per dollar in onshore trading, after hitting 6.9570 on Tuesday, the highest since May 2023.

Prior to Wednesday's opening, the People's Bank of China surprised markets by setting the midpoint rate CNY=PBOC at 7.0014 per dollar, 8 pips softer than the previous setting of 7.0006, in a move that some took as drawing a line at the psychologically significant 7 per dollar mark.