* N.Korea fires missile over Japan that lands in Pacific
* Yen rose vs dollar initially, but later pares gains
* Reaction to N.Korea missile launch seen short-lived
By Masayuki Kitano
SINGAPORE, Sept 15 (Reuters) - The yen held steady against the dollar on Friday, having risen earlier as North Korea fired a missile over Japan into the Pacific Ocean, rekindling investor concerns over geopolitical risks.
In early Asian trade on Friday the dollar slid from around 110.25 yen to as low as 109.55 yen shortly after reports of North Korea’s missile launch.
The dollar later pared its losses, however, and was last trading at 110.19 yen, little changed from late U.S. trade on Thursday.
Japan is the world’s largest net creditor nation, and at times of uncertainty traders assume Japanese repatriation of overseas funds will eclipse foreign investors’ selling of Japanese assets.
As a result, the yen has continued to operate as a safe-haven currency despite Japan’s geographical proximity to North Korea.
Against the Swiss franc, another safe haven, the dollar was steady on the day at 0.9635, after slipping as low as 0.9614 in early Asian trade.
While financial markets may stay jittery for now, the overall market reaction to North Korea’s missile launch will probably prove short-lived, market participants said.
Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo, said the market had expected North Korea might retaliate against the latest sanctions imposed on Pyongyang by the U.N. Security Council.
The dollar was unlikely to see any large fall against the yen, especially after the latest U.S. consumer inflation data bolstered expectations that the Fed could raise interest rates again by year-end, Murata added.
“U.S. rate rise expectations have risen compared to what was seen in early September, pushing up U.S. bond yields and I think that is supporting the dollar versus the yen,” he said.
North Korea fired a missile on Friday that flew over Japan’s northern island of Hokkaido far out into the Pacific Ocean, South Korean and Japanese officials said, further ratcheting up tensions after Pyongyang’s recent test of a powerful nuclear bomb. (Reporting by Masayuki Kitano; Editing by Muralikumar Anantharaman and Eric Meijer)