Dollar dives to lowest since early 2015, rattled by North Korea missile launch.

Euro punches above $1.20, dollar loses ¥109 handle

A key gauge of the U.S. dollar’s performance hit its lowest in more than two years Tuesday, as investors flocked to haven assets such as the Swiss franc and the Japanese yen after North Korea launched a ballistic missile over Japan.

Among notable moves, the greenback sank 1.1% against Switzerland’s currency, to a one-month low. The euro EURUSD, +0.4424% jumped through $1.20 for the first time since January 2015, and the dollar hit its lowest in four months against the Japanese yen.

The ICE U.S. Dollar Index DXY, -0.38% a gauge of the dollar against a half-dozen rivals, fell 0.5% to 91.78, moving around its lowest since January 2015, according to FactSet data.

The dollar was beaten down after Pyongyang launched a missile early Tuesday local time that passed over the northern Japanese island of Hokkaido and landed in the Pacific Ocean. It was the first missile fired over the main lands of Japan since 2009.

“Investors are concerned that this may lead to retaliation from not only Japan and South Korea but the U.S. too, especially given the rhetoric [U.S. President] Donald Trump deployed a couple of weeks ago,” wrote Fawad Razaqzada, market analyst at Forex.com.

Trump earlier this month in a testy exchange with North Korea pledged to respond to aggressions from Pyongyang with “fire and fury.”

The United Nations Security Council was reportedly set to meet late Tuesday to discuss the missile launch. The WSJ Dollar Index BUXX, -0.36% a broader gauge of the dollar’s performance, fell 0.4% to 85.08.

“Dollar bearishness is the big theme that has pervaded the market for most of 2017 and there is nothing (yet) to alter this view,” said ETX Capital Market’s senior market analyst Neil Wilson. “U.S. Treasury yields have sunk on renewed geopolitical worries stemming from North Korea and the dollar is down as Treasuries rally on safe haven demand.”

The dollar USDCHF, -1.0049%  bought 94.47 franc, down from 95.53 late Monday in New York. The euro fetched $1.2045 after hitting an intraday high of $1.2071. Late Monday, the euro traded at $1.1980.

Also, the dollar against the yen fell to an intraday low of ¥108.27. the lowest since April 17. The greenback USDJPY, -0.67%  recently fetched ¥108.48, down from ¥109.26.

“Hurricane Harvey is also a drag for the dollar as markets worry it will dent GDP in Q3 and could be enough to temper any calls for another [interest rate] hike,” said Wilson. “It remains to be seen what the damage is to GDP but if past experience is anything to go on it will not be as significant as perhaps some of these moves indicate and any dollar selling off the back of this may be overdone.”

Britain’s pound GBPUSD, +0.1701%  rose to $1.2956, up from $1.2933 on Monday in New York.

But the sterling trade-weighted index on Tuesday fell 0.4% to 74.50, revisiting levels last seen in November. That’s a “reflection of both euro strength & pound softness,” said Howard Archer, chief economic adviser to EY ITEM Club in a Twitter post Tuesday.

Source: marketwatch.com

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