Dollar edges higher as North Korea tensions subside

On Wednesday, the US Dollar rebounded from a 2-1/2-year low against its major counterparts and Asian Stocks took their cue from Wall Street’s stronger close, as investors’ concerns over North Korea’s latest missile test eased for now.

North Korea’s launch of a ballistic missile over Japan’s northern island of Hokkaido initially spooked investors on Tuesday. It triggered a drop in US Bond Yields and a slide in the Dollar against the Yen, which tends to benefit during times of crisis on the assumption that Japanese investors will repatriate funds.

In the meantime, it is still difficult to have a clear view on the Dollar’s near-term outlook, as investors are awaiting today’s closely watched US employment report for August which according to Thomson Reuters is expected to show 182,000 additional jobs this month.

Meanwhile, the British Pound sank to 11-month lows against the euro on Tuesday as the single currency rose across the board, as political uncertainty elsewhere drove investors in search of relative safety. The Euro has been boosted by political uncertainty in Britain, with its exit from the European Union hitting UK growth and keeping the Pound weak while growth picks up in the Euro zone. It slipped to 93.07 pence per Euro on Tuesday, its weakest since early October.

This week as well the New Zealand Dollar is poised for its worst monthly fall since January 2016, as talk of Central Bank intervention to cap gains adds to the currency’s woes, but market participants say the Reserve Bank of New Zealand (RBNZ) is nowhere close to acting.

Media interviews sparked speculation this month that the RBNZ could be one step closer to intervening in the foreign exchange market, after Governor Graeme Wheeler noted that the Central Bank has such powers at a parliament hearing following the latest rates decision.