North Korea carried a second missile test in less than a month early on Friday, lifting risk-off sentiment and pushing the dollar lower against its safe-haven counterparts. However, the currency managed to reverse its losses immediately, with investors turning their focus on US retail sales after CPI readings came in higher than expected on Thursday.
During early Asian trading hours, officials from South Korea and Japan reported that North Korea fired a ballistic missile that crossed over Japan’s northern island of Hokkaido and launched into the Pacific Ocean. This came after a day the regime threatened to “sink” Japan and turn the US into “ashes and darkness” over their supporting stance on additional sanctions imposed by the UN Security Council on Monday. In response to the latest nuclear test, which could easily reach the US Pacific territory of Guam, the Secretary of State Rex Tillerson said that “new measures” should be taken against Pyongyang.
The dollar index ticked down by 0.17%, from a high of 92.10 to a low of 91.92, but it immediately rose to 92.03 as investors were getting used to North Korea’s actions with the regime having already fired more than a dozen missiles this year.
The safe-haven yen and swiss franc posted short-lived gains versus the dollar. Dollar/yen touched a session-low of 109.54 but managed to climb to 110.48 afterwards, while dollar/swissie retreated to 0.9612 before it jumped to 0.9637.
Gold, which is positively correlated with rising geopolitical tensions, moved up by 0.36% to $1,334.16 per ounce but fell immediately to $1,329.67.
Throughout the day, markets will be focused to see whether August US retail sales and industrial production released later today would come lower relative to the previous month, as forecasts suggest, after consumer prices, published on Thursday, showed a surprising upward movement and increased the odds for a third rate hike this year. Note that inflation rose from 1.7% to 1.9% on a yearly basis, in August, while analysts anticipated price growth to touch 1.8%
The pound continued its uptrend breaking above the $1.34 key-level for the first time this year after the BOE meeting minutes published yesterday hinted a potential rate hike in the “coming months”. The MPC members, with the majority voting for rates to remain steady at the moment, supported that if economic conditions evolve in line with the central bank’s projections, a tighter monetary policy might be needed to drive inflation, which currently stands at 2.9%, back to the BOE’s target of 2%.
The euro posted little gains, edging up to $1.1924. The German Finance Minister Wolfgang Schaeuble supported in a newspaper interview early today that the ECB should approach its exit from ultra-easy monetary policy in caution in order to avoid any potential noise in financial markets.
The aussie was weaker versus the greenback as investors were forming their bets for rate increases in the US, slipping by 0.11% to $0.7996.
The kiwi surged by 0.30% on the day to $0.7242 after manufacturing PMI readings for the month of August increased by 2.5 points to 55.4 following two consecutive months of declines. Moreover, the currency found support on the latest election polls which showed that the leading National Party moved to the front position.
Dollar/loonie was slightly up at $1.2171. Oil prices headed lower during the Asian session, negatively affecting the oil-linked loonie. WTI crude was down by 0.66% at $49.56 per barrel and Brent fell by 0.50% to $55.20.