Growing geopolitical strains, particularly over U.S. statements concerning Greenland, have prompted global investors to reduce exposure to U.S. financial markets, fueling concerns over a broader "capital war" and sustained volatility in U.S. assets.
On Tuesday, the U.S. dollar index, which measures the greenback against six major peers, fell 0.41 percent to close at 98.642 in late trading at 20:00 GMT. Meanwhile, the yield on the 30-year Treasury note climbed above 4.90 percent in the trading session, as safe-haven demand drove capital toward alternatives such as gold and silver.
U.S. Consumer News and Business Channel (CNBC) reported that investors worldwide are selling American assets to hedge against heightened political risks.
Analysts warn that the sell-off reflects deepening doubts over the reliability of the United States as a trading partner.
The report also noted that the European governments may consider offloading U.S. holdings in response to recent threats from the U.S. President Donald Trump's administration targeting Greenland.
Ray Dalio, founder of Bridgewater Associates, said on Tuesday in Davos, Switzerland that the U.S. interest in Greenland could trigger a retreat from American assets by foreign governments and investors, describing the dynamic as "capital warfare." He also cautioned that mounting trade friction and rising fiscal deficits may further weaken confidence in U.S. debt, accelerating a shift into assets like gold.
Recent U.S. statements regarding Greenland, including suggestions of potential military actions and threats to impose tariffs on European nations that oppose U.S. claims, have sparked discussions in Europe about retaliatory measures, including large-scale disposals of U.S. assets.
The Deutsche Bank has previously raised the prospect of "weaponizing capital," warning that regulatory tightening, tax investigations, or restrictions on profit repatriation targeting U.S. firms could significantly impact American businesses.
Data from the U.S. Treasury Department shows that entities within the European Union hold over 10 trillion U.S. dollars in U.S. assets, with Britain and Norway holding additional substantial sums.
Meanwhile, Bloomberg noted on Monday that any move by Europe to deploy its holdings of U.S. assets as a strategic tool would signal an escalation of transatlantic tensions into the financial sphere, with direct repercussions for global capital markets.
The shift underscores mounting risks to the long-term appeal of U.S. credit and the stability of the dollar-dominated financial system.
Rising geopolitical tensions trigger global shift away from US assets
