LONDON (Reuters) – The dollar rose on Monday and world shares climbed back towards record highs, on relief that North Korea did not conduct a further missile test at the weekend when it celebrated its founding anniversary.
A weakening of Irma over the United States also tempered demand for safer assets, the hurricane having caused a number of deaths and knocked out electricity to 3 million homes and businesses on its way up the Florida coast. (Full Story)
European shares .STOXX started 0.75 percent higher as an official downgrading of Irma’s strength lifted insurance firms. EU, while gold XAU= the yen JPY= and Treasuries US10YT=RR dipped.
Winning a reprieve from risk aversion, the dollar .DXY registered its biggest gains in the currency markets in ten days. It added 0.5 percent against its perceived safe-haven Japanese counterpart the yen JPY and clawed back ground against the high-flying euro as an ECB policymaker flagged caution about the single currency’s recent rise. /FRX
“The good news was that the eye of Hurricane Irma took a path west of Miami and has since weakened to a Category 1 storm so that damage in Florida – whilst still severe… appears not to be quite as catastrophic as had been feared last week,” said Daiwa Capital Markets strategist Chris Scicluna.
“And thankfully there was no bad weekend news out of North Korea either.”
Japan’s Nikkei .N225 rose 1.4 percent after Pyongyang held a massive celebration to congratulate the nuclear scientists and technicians who steered the country’s sixth and largest nuclear test a week earlier. (Full Story)
The United States and its allies had been bracing for another long-range missile launch to mark the 69th anniversary of North Korea’s founding on Saturday.
The sense of relief lifted E-Mini futures for the S&P 500 ESc1 by 0.5 percent, while yields on 10-year Treasury notes rose 3 basis points to 2.09 percent US10YT=RR.
South Korea’s main index .KS11 added 0.8 percent, while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.4 percent.
“It’s too early to say the (North Korean) risks are gone, but one thing for sure is that market players now think the situation won’t get worse as it did some weeks ago,” said Lee Kyung-min, a stock analyst at Daishin Securities in Seoul.
Lee said many foreign investors and domestic institutions were purchasing South Korean tech and chemicals shares as quarterly earning season neared.
The dollar hovered at 108.50 yen JPY=, up from Friday’s 10-month trough of 107.32. Against a basket of currencies, it added 0.15 percent to 91.490 .DXY still uncomfortably close to last week’s 2-1/2-year low of 91.011.
The euro eased to $1.2017, having hit a top of $1.2092 on Friday amid speculation the European Central Bank was closer to starting a wind-back of its stimulus programme.
ECB officials last week generally agreed their next move would be to cut their bond purchases and discussed a range of options, Reuters reported. (Full Story)
RELAXED YUAN CONTROLS?
China’s central bank was also a focus in Asia after sources said it planned to scrap reserve requirements for financial institutions settling foreign exchange forward yuan positions with effect from Monday.
“The removal potentially makes it easier for traders to purchase the USD, easing the pressure for yuan appreciation,” said analysts at ANZ in a note.
“The change likely signals some discomfort about the stronger yuan and its impact on Chinese exports.”
The dollar was up 0.16 percent against the offshore yuan at 6.5128 yuan CNH=, off a low of 6.4437.
There were also reports Beijing was planning to shut down local crypto-currency exchanges, dealing a blow to bitcoin’s recent stellar rally. (Full Story)
Bitcoin was quoted at $4,300 BTC=BTSP on the BitStamp platform, off a recent record high of nearly $5,000.
In commodity markets, gold softened 0.7 percent to $1,337.81 an ounce XAU=, away from a one-year peak of $1,357.54.
Oil prices regained a little ground after the Saudi oil minister discussed the possible extension of a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts.
The news of the talks on Sunday helped offset the downward pressure on oil prices amid worries that energy demand would be hit hard by Hurricane Irma. O/R
U.S. crude CLcv1 was trading 36 cents firmer at $47.84 a barrel, while Brent LCOcv1 rose 22 cents to $54.00.
Additional reporting by Wayne Cole in Sydney; editing by John Stonestreet