Aussie drops as Q2 GDP shy of expectations, Nkorea in focus
The Aussie eased in Asia on Tuesday as GDP figures for the second quarter came in slightly below expectations and the dollar held weaker against the yen on Wednesday despite disappointing wages data from Tokyo with investors watching North Korea for signs it could test an ICBM on its founding day, Sept. 9, that could invite a response to use anti-missile technology to knock it down.
Earlier, Japan reported average cash earnings dropped 0.3%, compared with a gain of 0.5% expected for August on year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.03% to 92.31.
Overnight, the dollar came under pressure on Tuesday, as rising tensions between the U.S. and North Korea kept demand for safe haven currencies steady while a top Federal Reserve official urged caution over further rate increases until the pace of inflation improved.
The dollar made a subdued start to the U.S. trading week, following the Labor Day public holiday Monday, as investors fled riskier assets in the wake of North Korea’s successful test of a hydrogen bomb over the weekend.
The U.S. warned on Monday that North Korea was “begging for war” but asked the UN to respond to Pyongyang’s test of its largest and most powerful nuclear bomb with tougher sanctions to deter the regime from conducting further nuclear tests.
Rising geopolitical uncertainty stoked demand for safe haven currencies like the yen and Swiss franc, weighing on the greenback.
Investors shifted focus to monetary policy later in the session, after Fed Governor Lael Brainard urged the U.S. central bank to delay raising interest rates as the pace of inflation remains subdued.
Brainard’s comments come a few hours ahead of speeches by Federal Reserve Bank of Minneapolis President Neel Kashkari and Federal Reserve Bank of Dallas President Robert Kaplan due later in the session.
The euro and sterling benefited from the slump in the greenback with latter surging above $1.30 for the first time in three weeks.
The rise in the euro comes ahead of a European Central Bank interest rate decision due Thursday