Dollar Weakens as North Korea Jitters Outweigh Debt-Ceiling Deal

  • Aussie declines as retail sales, trade data miss estimates
  • Boost to dollar from Trump agreement should be minor: Westpac

JPMorgan's Gartside Says Markets Dovish Right Now

The dollar fell against most of its Group-of-10 peers as tensions surrounding North Korea outweighed positive sentiment arising from an extension of the U.S. debt limit.

The Bloomberg Dollar Spot Index headed for a sixth day of losses amid speculation North Korea will conduct a missile launch this weekend to mark its foundation day. The yen rose as South Korea’s premier said there isn’t much time until the North is fully nuclear armed. Australia’s dollar fell as retail sales and trade balance data missed economists’ forecasts.

“If the threat remains and markets remain nervous about North Korea, then dollar-yen will remain under downward pressure,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “There was a temporary reprieve for the dollar via the debt and funding agreement, but December is near enough for the market to continue pricing in some chance of disagreement.”

The yen hit a session high in reaction to South Korea’s Prime Minister Lee Nak-yon stating the North may launch a missile on Sept. 9. Residual orders from North-American accounts saw the gain curtailed as did fund-related flows over the Tokyo fix, according to an Asia-based currency trader not authorized to speak to the media.

  • BBDXY drops 0.1% after falling 0.8% over previous 5 days
  • USD/JPY weakens 0.1% to 109.11 after declining as much as 0.3%
    • Non-residents’ purchases of Japanese bonds climbed almost threefold to a net 1.3592t yen in week ended Sept. 1
  • U.S. Treasury yields lower across curve, with benchmark 10-year yield dropping 1bp to 2.09%
  • USD trimmed declines Wednesday when President Trump and Democrats agreed to a three-month extension of the U.S. debt limit
  • EUR/USD rises 0.1% to 1.1929 versus 1.1916/35 range
    • ECB’s Draghi will speak after policy meeting in Frankfurt
    • “We expect Draghi to strike a cautious balance between giving the first clear hints at the upcoming tapering and dovish sounds to rein in FX markets,” Rob Carnell, head of research and chief economist for Asia at ING in Singapore, writes in note
  • Aussie dips back under 0.80 after July retail sales and trade balance miss estimates
  • AUD/USD falls 0.1% to 0.7991 after reaching 0.7985
    • AUD/USD FX options for A$625m at strike price of 0.8025 expire Thursday
    • Thursday’s data-driven dip in currency shouldn’t extend that much against the kiwi, according to Peter Dragicevich, FX strategist at Nomura
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