Dollar Stumbles as 'Greenland Row' Sparks Tangible Capital Flight

The US Dollar index has surrendered virtually all its year-to-date gains, dropping for a second consecutive session as the geopolitical standoff over Greenland shifts from diplomatic rhetoric to financial reality. The catalyst for the sell-off is the confirmation that Danish pension fund Akademiker Pension has liquidated its holdings of US sovereign debt, citing the escalating dispute. Markets are now bracing for the possibility that the broader $210 billion Danish pension sector could follow suit.

'Weaponization' of Finance

The sell-off in the Greenback and the concurrent spike in US 10-year yields to 4.28% reflect a growing “political risk premium” embedded in US assets. Following President Trumps threat to impose 10-25% tariffs on European nations if his bid to purchase Greenland is rejected, investors are rotating into defensive assets.

The move by Akademiker Pension serves as a tangible signal that the “De-dollarization” narrative is gaining traction among institutional allocators. Analysts note that unlike previous spats, this event involves direct capital flow reversals.

• EUR/USD has surged past 1.1730, benefiting from the reallocation out of USD.
• Gold has hit record highs, reinforcing the flight to safety.

Davos Tension High

The timing creates a volatile backdrop for the World Economic Forum in Davos. President Trump is expected to address the forum later today, with markets hypersensitive to any language regarding “allies' responsibilities” or further protectionist measures.

Canadian Prime Minister Mark Carney (former central banker) delivered a stinging critique at the summit, declaring the “rules-based order” dead and urging mid-sized powers to form alliances against economic coercion. This coordinated pushback from US allies suggests that the trade friction is deepening, potentially weighing further on the Dollar in the near term.