* Regional tension mounts after Pyongyang's missile test
* Yen advances to 5-month highs vs dollar, euro, sterling
* US Treasury's currency report taken in stride
* US declines to name any trade partner as currency
(Updates prices, adds details and quotes)
By Shinichi Saoshiro
TOKYO, April 17 The dollar dipped to a
five-month low against the yen on Monday as rising tensions over
North Korea kept the safe-haven Japanese currency in demand.
The dollar index against a basket of major currencies was
down 0.2 percent at 100.390, weighed down following the
release of Friday's weak U.S. retail sales and consumer prices
data and as flight-to-safety drove U.S. Treasury yields to
The U.S. currency extended losses from the previous day and
retreated to 108.135 yen, its lowest since mid-November.
The yen remained broadly bid against other currencies as
well. The euro and the pound slid to five-month troughs of
114.955 yen and 136.05 yen, respectively.
Increasing geopolitical risks another notch, North Korea on
Sunday made what was believed to be a failed missile test
launch. Regional tensions have risen over the past weeks as U.S.
President Donald Trump has taken a tough rhetorical line with
"It is unclear whether the situation over North Korea will
escalate into military action, but uncertainty is increasing and
the dollar continues to edge lower. The dollar also looks shaky
technically, after slipping below the 200-day moving average of
108.80 yen," said Masafumi Yamamoto, chief currency strategist
at Mizuho Securities in Tokyo.
Japan's proximity to the Korean Peninsula, however, means
that the yen's safe-haven status could be eroded if tensions
between Washington and Pyongyang escalated into open conflict.
"Right now the markets are still functioning, with the
reaction to the situation being weaker equities, lower Treasury
yields and the yen firming against the dollar," said Koji
Fukaya, president at FPG Securities in Tokyo.
"But it could be an entirely different matter should an
international emergency actually take place," he added,
reckoning that the dollar could benefit due to its position as
the world's principal reserve currency.
With the bulk of the market's focus on how the standoff
between the United States and North Korea will play out, the
semi-annual U.S. Treasury currency report released late on
Friday did not receive as much attention as some had initially
The Trump administration declined to name any major trading
partner as a currency manipulator in the highly-anticipated
report on Friday, backing away from a key Trump campaign promise
to slap such a label on China.
The U.S. Treasury, however, ensured that currency policies
would remain a sticking point going forward by keeping China,
Germany and Japan on a "monitoring list."
"Market reaction, if there was one, to the currency report
has already faded. The U.S. Treasury does not look like it will
take a strong stance on currencies. But in the case of the Trump
administration the market will need to watch out for what his
trade advisors may have to say on this issue," said Yamamoto at
The euro was a shade higher at $1.0622, having spent
the previous session in a very tight range.
Wariness over the first round of the French presidential
elections on April 23, another potential source of geopolitical
risk keeping global markets nervous, was expected to cap the
common currency this week.
The Australian dollar added 0.1 percent to $0.7588
while the New Zealand dollar rose 0.4 percent to $0.7030
The risk-sensitive Aussie and kiwi fell to three- and
one-month lows, respectively, in the middle of last week. But
they have pulled back on upbeat local economic indicators and as
the greenback fell broadly on Trump's comments that the dollar
was getting too strong.
Currencies, including the Australian dollar, which tends to
react to the economic fortunes of China, showed little response
to data showing the Chinese economy grew at a slightly
faster-than-expected 6.9 percent in the first quarter.
(Editing by Sam Holmes)