Reports that hermit kingdom will proceed with a 6th nuclear test rattle markets.
The dollar pared its gains against the Japanese yen late Tuesday following reports that North Korea plans to proceed with its sixth nuclear test despite U.S. President Donald Trump’s threat of possible military intervention.
The greenback USDJPY, -0.17% was up 0.5% at ¥113.87 late Tuesday in New York after touching a seven-week high above ¥114 earlier in the session. By comparison, it traded at ¥113.25 late Monday in New York.
The yen is a popular safety play that tends to appreciate when geopolitical tensions rise. Earlier this year, it rose sharply after Trump ordered a missile strike on a Syrian air base.
The dollar, meanwhile, remained higher on the day against the euro EURUSD, -0.3135% with one unit of the shared currency buying $1.0872 late Tuesday in New York, compared with $1.0925 late Monday.
“The fact that there’s an actual possibility of a military conflict, that’s a factor that traders have considered a positive for yen appreciation,” said Juan Perez, a currency trader at Tempus Inc.
The ICE Dollar index DXY, +0.19% rose 0.2% to 99.39, with the greenback rising against all other major currencies in the index. The WSJ Dollar Index BUXX, -0.01% which measures the U.S. currency against 16 others, rose 0.4% to 90.54.
Investors heard from Minneapolis Fed President Neel Kashkari and Boston Fed President Eric Rosengren, but neither official focused on monetary policy. Earlier in the day, Labor Department data revealed that job openings in the U.S. were flat in March as economic momentum stalled.
Investors are looking ahead to important retail sales and inflation data later in the week after last Friday’s closely watched U.S. jobs report showed hiring rebounded in April, though wage pressures declined somewhat. Most analysts said the report supports the Fed’s case for raising interest-rates at a steady pace.
The Fed funds futures market, used by investors to place bets on the path of interest rates, is presently pricing in a more than 80% probability that the Fed will raise interest rates at its June meeting.
On Monday, the euro had jumped above $1.10 to a more than six-month high after centrist Emmanuel Macron won almost two-thirds of the vote in the runoff for France’s presidency, easily defeating euroskeptic candidate Marine Le Pen.
Read: Macron handily wins French presidential election
Le Pen had promised to lead France out of the eurozone, which was viewed by market participants as a threat to the European Union status quo, with a potential to roil stocks, bonds and currency markets globally.
Macron next faces parliamentary elections in June, and given that there’s a lack of significant support, it remains uncertain if he can build a parliamentary majority.
Read: Former French Prime Minister Valls dumping Socialists to run as candidate for Macron
See: Investors are breathing a sigh of relief over France, for now
In other trading, the pound GBPUSD, +0.0000% moved lower, trading at $1.236 late Tuesday in New York, compared with $1.2944 late Monday.