Geopolitical Concerns As North Korea Launches Missile, Yen Gains

The yen gained against the dollar on Tuesday as the dollar slipped 0.4 percent at 112.910 yen. News of the missile launch by North Korea which according to Tokyo landed in its Exclusive Economic Zone saw the dollar unaffected. But dipped shortly after Pyongyang said that they would be making a major announcement later in the day.

Risk of Serious Escalation

The missile is a newly developed ICBM and according to Joint Chiefs of Staff in South Korea, flew 930 kilometers and reached an altitude of 2,800 kilometers and is thought to possess capabilities of hitting South Korea and Japan with as much as 20 atomic bombs. This latest launch risks serious escalation with the US and its neighbors over the North Korean weapons program.

Director of forex at Societe Generale in Tokyo, Kyosuke Suzuki said that the markets will be waiting for the announcement by North Korea, but at the moment the dollar/yen is in a reasonable range.

Aussie Dollar Slips

The Reserve Bank of Australia’s announcement following their meeting to leave interest rates unchanged, saw the Aussie dollar slip 0.7 percent at $0.7609 and shed 1.1 percent to 85.92 yen.

Expectations were that the Australian central bank would join the stance taken by the European Central Bank, the Bank of Canada and the Bank of England to tighten policy, instead they stuck to a neutral stance on the economy and interest rates.

Currencies

The euro fell 0.6 percent at 128.105 yen and slid 0.2 percent at $1.1343 to the dollar.

Pound sterling dipped 04 percent to 146.12 yen.

The dollar index which measures against a basket of six major currencies held firm against its rivals at 96.254. After the release of data from the Institute of Supply Management national factory activity index, which showed a stronger than expected rise in June of 0.6 percent the national factory activity index gained sending the 10-year treasury yield to a high last seen in May 16.

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