August 30, 2017 / 7:51 AM / in 3 months

FOREX-Dollar recovers from 4-month low vs yen as N. Korea fears ease

* Investor jitters over N.Korea related tensions ease for now

* Dollar up from Tuesday’s 4-1/2 month low vs yen

* Euro down from 2-1/2 year peak vs dollar

* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh

By Jemima Kelly

LONDON, Aug 30 (Reuters) - The dollar recovered from a four-month low against the Japanese yen on Wednesday as investors’ worries over North Korea’s latest missile test eased, boosting appetite for riskier assets.

The yen and Swiss franc – traditionally sought at times of political or financial uncertainty – had both surged on Tuesday, with the franc hitting its strongest against the dollar in two years .

North Korea’s launch of a ballistic missile over Japan’s northern island of Hokkaido had been the primary cause for a risk-off mood across markets on Tuesday, triggering a drop in U.S. bond yields and dragging down the dollar index – which measures the greenback against a basket of six currencies – to a 2-1/2-year low.

The index was up 0.3 percent by 0715 GMT on Wednesday.

The recovery in the greenback had begun during Tuesday’s U.S. trading session, with data showing U.S. consumer confidence hitting a five-month high and house prices rising again.

Some investors said risk appetite had also been helped by the response to the North Korean missile test from the U.S. administration. President Donald Trump made a statement saying that the world had received the country’s message “loud and clear” and that all options were on the table.

“Instead of the President responding to the escalation via Twitter, as has happened on many recent occasions, the White House issued an official statement to condemn the action,” said IronFX analyst Charalambos Pissouros.

“This may have been interpreted by investors as a sign that the U.S. will approach the situation in a more measured and diplomatic manner, as opposed to raining down “fire and fury”.

The euro had benefited from broad dollar weakness on Tuesday, rising above $1.20 for the first time in 2-1/2 years, but it was back below that level on Wednesday, down 0.3 percent at $1.1944.

The dollar was up 0.3 percent at 110.11 yen following Tuesday’s 0.8 percent slide against the currency, which tends to benefit during times of worry on the assumption that Japanese investors will repatriate funds.

While North Korea-related risks haven’t gone away, the fact that the dollar managed to bounce back sharply from Tuesday’s lows could lend support to the greenback in the near term, said Andrew Bresler, deputy head of sales trading in Asia-Pacific for Saxo Markets in Singapore.

“We’ve certainly remained pretty cautious on the outlook for risk here, and definitely not buying fully into the discounting of the North Korean tensions,” he said.

In the wake of the sharp swings seen in the dollar against major currencies on Tuesday, it is difficult to have a clear view on the dollar’s near-term outlook, Bresler said, adding that U.S. economic data would be a focus in coming days

Investors are also gauging the potential economic fallout of Tropical Storm Harvey, which brought catastrophic flooding to Texas this week and shut down nearly a fifth of the U.S’s crude oil refining capacity.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

Additional reporting by Masayuki Kitano and Lisa Twaronite in Singapore; Editing by Richard Balmforth

Our Standards:The Thomson Reuters Trust Principles.
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