How Donald Trump’s bid to take Greenland is boosting the Australian dollar

Donald Trump’s bid to take Greenland could make it make cheaper for Australians to holiday in the United States but push prices up for those wanting to see Japan or Europe.

The Australian dollar on Wednesday hit 68 US cents for the first time since October 2024, as the US dollar fell.

Currency markets were unimpressed with the American President’s threat of new 10 per cent tariffs against European nations that didn’t back his push for Greenland, an autonomous territory of Denmark.

More US dollar weakness could conceivably see the Australian dollar hit 72 US cents for the first time since April 2022, Moomoo chief executive and market strategist Michael McCarthy told The Nightly.

“I’m not saying that will happen now but in a crisis, the Aussie can move four cents in a day,” he said.

“It could get there within 24 hours if things deteriorate very rapidly; now that’s not the most likely scenario, I stress that, but I certainly wouldn’t be shorting the Aussie dollar against the US dollar.”

President Trump’s antics saw 10-year US Treasury yields soar from 4 per cent to 4.3 per cent, as traders dumped American government bonds.

“That’s a sign that people are losing faith in the US economy because of the US political system so that selling of the US dollar means the Aussie dollar’s likely to appreciate — Aussie versus US is likely to go up but the problem is a trade war, even the market perception of one is coming, will weigh on the economic outlook and that is bad news for Australia,” Mr McCarthy said.

A stronger Australian dollar would certainly make travel cheaper for those heading to the United States.

“It certainly means cheaper holidays in the US — it might mean more dangerous conditions for the US at the same time; economic deterioration often brings higher levels of unrest,” he said.

A strengthening euro or yen, as a result of weaker US greenback, would make it more expensive for Australians to holiday in Europe or Japan.

“Looking for a holiday in Japan, I’d be looking to get that done very quickly and maybe lock in your currency now,” Mr McCarthy said. “Similar situation with Europe, the euro.”

The Australian dollar usually soars during times of higher global growth, with some of the currency’s fortunes tied to commodity prices.

The International Monetary Fund this week forecast the US economy would grow by 2.4 per cent in 2026, which would be stronger than Australia’s 2.1 per cent pace but below the global average of 3.3 per cent.

More trade tensions, however, could weaken global growth and paradoxically see the Australian dollar continue to strengthen against a weakening US dollar.

This would not necessarily help bring down Australia’s high level of goods inflation, running at 3.3 per cent in the year ended November 30, if the Australian dollar weakened against other currencies as it firmed against the US dollar.

Since the start of January, the Australian dollar has traded between 66 US cents and 68 US cents, with traders also taking cues from Australia’s higher level of inflation and the possibility of Reserve Bank of Australia rate hikes in 2026.

“The upward bias has been supported by a combination of hawkish domestic signals and broad US dollar softness,” ANZ currency experts Preksha Jain, Felix Ryan and Mahjabeen Zaman said in a note.

Wall Street’s benchmark S&P 500 lost 2 per cent but the Australian share market’s benchmark S&P/ASX200 finished Wednesday 0.4 per cent weaker after President Trump threatened that from February 1, exports to the US from Denmark, Norway, Sweden, Germany, the UK, France, the Netherlands and Finland would all be subject to a 10 per cent tariff.