Easter Monday blues for the USA dollar


A currency trader passes by screens showing the Korea Composite Stock Price Index (KOSPI), center left, and foreign exchange rate, center right, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, April 14, 2017.

Asian stocks were mixed Tuesday as tensions over the situation on the Korean Peninsula softened somewhat following U.S. Vice President Mike Pence's departure from South Korea for Japan.

North Korea's missile launch on Sunday increased tensions between Washington and Pyongyang despite its failure, weighing on the dollar against the yen, deemed a relatively safe asset, dealers said.

Pence and South Korea's acting president, Hwang Kyo-ahn, said they would proceed with the early deployment to South Korea of the US THAAD missile-defense system, in spite of China's objections.

Spot gold added 0.1 per cent to US$1,284.95 an ounce.

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"One suspects the concerns in North Korea have further to play out", said IG market strategist Chris Weston, citing worries of further missile testing in the near term.

Barring a major shock in the China readings, markets are expected to remain focused on United States data and its possible impact on the pace of interest rate hikes, and concerns over North Korea and the French presidential election.

Despite the tensions, Wall Street posted its first session of gains in four as investors turned their attention to first-quarter corporate earnings. The Standard & Poor's 500 index climbed 0.9 percent to close at 2,349.01. OPEC will also be meeting in May to determine whether to continue their production cuts and to evaluate other ways to respond to continued production increases in the US, which is now the world's third-biggest oil producer.

The ICE U.S. Dollar index DXY, -0.41%, a measure of the greenback's strength against a basket of six rival currencies, softened 0.3% to 100.27, while the WSJ Dollar Index BUXX, -0.28%, which gauges the dollar's strength against a broader basket, fell 0.2% to 89.92. The dollar was trading at 108.89 yen, down from 109.12 yen.

It hit its lowest level since November 15 on Monday, before closing higher on comments by US Treasury Secretary Steven Mnuchin that he saw the currency's strength over the long term as a positive, although he agreed with Trump's view that it hurts exports in the short term.

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Pence's visit to Japan, the next stop on his Asia trip, is key for the currency.

The dollar index fell near a three-week low on disappointing USA housing starts data and nerves over trade talks between the United States and Japan, while Britain's pound soared after Prime Minister Theresa May called for a snap general election.

"Dollar-yen has been suffering from risk-aversion, which is reflected in weak stocks and just in general, with a bit of geopolitical fears", said Alvise Marino, FX strategist at Credit Suisse in NY. New home prices across China jumped 11.3 per cent from a year earlier, Reuters calculations showed.

In Tokyo trading, Toyota slipped 1.00 percent to 5,740 yen by the break, while Honda fell 0.80 percent to 3,092 yen.

The euro EUR=EBS was steady at $1.0639, retaining Monday's 0.25 percent gain.

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Oil prices were weighed by concerns that USA production growth is undermining efforts to cut oversupply, but US crude pared losses after gasoline data showed a draw of about 400,000 barrels in the New York Harbor region. Brent crude, used to price worldwide oils, added 3 cents to close at $55.89 per barrel in London.