Dollar subdued amid North Korea concerns
SINGAPORE (Reuters) – Asian stocks were mixed on Tuesday and the dollar gave up
the gains it had made when the U.S. Treasury Secretary spoke in support of a stronger
currency as escalating tensions around North Korea dragged sentiment lower.
Financial spreadbetters predict a mixed start for European stocks, with Britain’s FTSE 100
(.FTSE) set to open 0.2 percent lower, and Germany’s DAX (.GDAXI) and France’s CAC
40 (.FCHI) to start the day up 0.2 percent and 0.3 percent respectively.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped
Japan’s Nikkei (.N225) added 0.4 percent, shrinking earlier gains.
South Korea’s KOSPI (.KS11) advanced 0.2 percent.
U.S. Vice President Mike Pence told business leaders in Seoul that the U.S. will review and
reform the five-year-old free trade agreement between the two countries, in part because
South Korea imposes too many barriers on U.S. business.
The United States and South Korea pledged at the close of Pence’s visit to forge a stronger
alliance. They agreed to cooperate with China to rein in North Korea, which has vowed to
conduct more tests following Sunday’s failed missile launch.
Pence warned North Korea on Monday that recent American military strikes in Syria and
Afghanistan showed President Donald Trump’s resolve should not be questioned.
Pence and South Korea’s acting president, Hwang Kyo-ahn, said they would proceed with the
early deployment to South Korea of the U.S. THAAD missile-defense system, in spite of
The Korean won (KRW=) weakened about 0.8 percent, with the dollar at 1,141.40 won.
“It seems the focus is now firmly on future missile tests from North Korea and whether any future
tests will actually be successful,” Chris Weston, chief market strategist at IG in Melbourne, wrote
in a note. “One suspects the concerns in North Korea have further to play out.”
Despite the tensions, Wall Street posted its first session of gains in four as investors turned their
attention to first-quarter corporate earnings. All three major indexes (.DJI) (.SPX) (.IXIC
) advanced about 0.9 percent overnight.
U.S. housing starts and building permits for March, as well as industrial production, are due later
in the session.
The dollar was weighed down by worries over North Korea, Mnuchin’s comments that Trump’s
promised tax reform will be delayed, and the first round of talks between Japan’s leaders and
Pence on Tuesday.
The dollar index (.DXY), which tracks the greenback against a basket of trade-weighted peers,
was little changed at 100.34, after rising earlier.
The dollar inched up 0.1 percent to 109.05 yen (JPY=). It hit its lowest level since Nov. 15 on Monday,
before closing higher on Mnuchin’s remark that a strong currency would be positive over the long term,
while agreeing with Trump that it hurts exports in the short term.
Pence’s visit to Japan, the next stop on his Asia trip, is key for the currency. His talks with Prime
Minister Shinzo Abe are expected to focus on security issues, while his meeting Deputy Prime
Minister Taro Aso will deal with economics.
“For dollar/yen, the main focus will be on what kind of pressure the United States could apply on
Japan as basically U.S. trade policy is linked with a policy for a weaker dollar,” said Junichi
Ishikawa, senior forex strategist at IG Securities in Tokyo.
“The yen cannot simply continue weakening along with higher stocks under such conditions,”
China’s CSI300 index was up about 0.2 percent after new home prices across China
jumped 11.3 percent from a year earlier, with prices across many major cities soaring.
The Australian dollar (AUD=D4) lost 0.4 percent to trade at $0.7559, and Australian shares (.AXJO)
slipped 1 percent, after minutes of the central bank’s April meeting, in which it left rates unchanged,
highlighted the balancing act it faced between a subdued labor market and escalating household debt.
The euro (EUR=EBS) was steady at $1.06425, holding Monday’s 0.25 percent gain.
In commodities, oil prices were little changed following Monday’s losses, amid concerns over rising U.S.
U.S. crude (CLc1) was at $52.62 a barrel, after falling 1 percent on Monday, its biggest decline in almost
a month. Global benchmark Brent crude (LCOc1) was at $55.38.