Dollar index gains as NKorea issue headed to UN Security
The dollar inched up on an index basis in Asia on Tuesday as North Korea fired a missile across Japanese territory, putting tension on the Korean peninsula front and center, though the initial rush to yen for safe-have demand backed off later in the day with a U.S. Security Council meeting scheduled for New York time.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.01% to 92.18.
In Japan, household spending data dropped 1.9% 0.2% on month, mores than the 0.5% decline expected in July and fell 0.2% on year. missing a 0.7% rise seen. Unemployment data held steady at a .8% rate in July.
North Korea fired a missile early on Tuesday from near Pyongyang that flew over northern Japan, the South Korean and Japanese governments said. The Japanese military did not attempt to shoot down the missile, which passed over Japanese territory around 6:06 a.m. time (2106 GMT).
The move by North Korea comes as tensions had eased between North Korea and the United States after weeks of threats.
North Korean leader Kim Jong Un threatened to fire missiles into the sea near the U.S. Pacific territory of Guam and U.S. President Donald Trump warned Pyongyang would face "fire and fury" if it threatened the United States.
Overnight, the dollar slumped to a more than sixteen-month low against a basket of major currencies on Monday as sentiment on the greenback remained negative, following a speech by Federal Reserve chair Janet Yellen on Friday while concerns over Tropical Storm Harvey’s economic implications added to downside momentum.
In what was quiet day for top-tier economic data, investors continued to focus on Yellen’s speech, in which she avoided talking about monetary policy, denting rate-hike expectations.
According to investing.com’s fed rate monitor tool, about 36% of traders expect the Federal Reserve to hike rate in December. In the U.S., fears that Storm Harvey could have overreaching economic implications, as flooding caused by the storm tore through Texas, the second largest U.S. city in GDP terms, disrupting refinery activity.
The Texas Gulf coast is home to nearly a third of U.S. refining capacity, according to Energy Information Administration. Meanwhile a surge in the euro to a 2 ½ a half year high also weighed on the greenback, as investors mulled over the possibility of the ECB tapering its quantitative easing programme at its September policy meeting next week in the wake of ECB president Draghi’s comments on Friday.
Draghi didn’t attempt to use his speech at Jackson Hole to curb the rise in the euro, suggesting that the ECB president may be less concerned than his ECB colleagues with the recent spike in the euro.
"(Draghi) does not seem to be overly concerned with the current euro levels, which is the market’s justification to move the euro higher," said Commerzbank (DE:DE:CBKG) currency strategist Esther Reichelt in Frankfurt.