Trump said over the weekend he would impose an additional 10% import tariff from Feb 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, until the United States is allowed to buy Greenland.

Major European Union states decried the tariff threats over Greenland as blackmail on Sunday, with France proposing responding with a range of previously untested economic countermeasures.

In the foreign exchange market, the initial knee-jerk reaction in early Asia trade was to sell the euro and sterling, in a move that pushed them to a seven-week low and one-month trough of US$1.1572 and US$1.3321, respectively.

However, the two currencies bounced from their lows and it was the dollar that came under pressure as the trading day got underway, as investors assessed the longer-term implications of Trump’s latest move on the greenback’s standing.

That helped the euro bounce 0.19% to trade at US$1.1619, while the British pound similarly recovered 0.17% to US$1.3398.

Investors had dumped the dollar in the wake of last April’s “Liberation Day” announcement when Trump unveiled sweeping tariffs on the world, triggering a crisis of confidence in US assets.

A similar trend played out on Monday, as the greenback slid 0.45% against the safe-haven Swiss franc to 0.7983, and was down 0.33% to 157.59 yen.

The dollar index fell 0.19% to 99.18.

“My working assumption is that an ‘off ramp’ from these threats will soon be found, and that this turns into yet another ‘TACO moment’, or an example of the ‘art of the deal’, depending on how one views these things,” said Michael Brown, senior research strategist at Pepperstone.

Elsewhere, the risk-sensitive Australian dollar was down just 0.02% to US$0.6690, with its losses capped by the broad dollar weakness.

The New Zealand dollar rose 0.16% to US$0.5761.