Dollar hits three-week high, Asian stocks eke out gains

Sydney — The dollar jumped to a three-week high on Tuesday, while stock markets in Asia ticked up, as a landmark US-North Korea summit in Singapore raised hope of a deal to end a nuclear standoff on the Korean peninsula.

US President Donald Trump said he had forged a “good relationship” with North Korean leader Kim Jong-un at the start of their historic meeting, just months after they traded insults and tension spiralled in the region over the reclusive regime’s nuclear programmes.

Kim said the meeting was “a good prelude to peace”, but there was some unease among investors about the outcome of the talks given the tense relations between the two nations.

The combatants of the 1950-53 Korean War are technically still at war, as the conflict, in which millions of people died, was concluded only with a truce.

The dollar rose against the safe-haven yen, while the Korean won gained 0.2% to edge above a recent two-week trough. US stock futures were barely changed, with E-Minis for the S&P 500 up 0.02% and Dow futures inching 0.06% higher.

In Asian equity markets trading was volatile, with Japan’s Nikkei paring early gains to add 0.3% after earlier rising as much as 0.9%. MSCI’s broadest index of Asia-Pacific shares outside Japan seesawed between positive and negative territory, and was last up 0.1%. South Korean shares fell 0.2% in choppy trading, while Chinese shares were buoyant after starting in the red, with the blue-chip index jumping 0.8%. Australian shares were a tad firmer.

“It seems that investors are hesitant to carry large directional exposure into this week’s events,” Citi analysts said in a note.

Even so, leveraged investors were long on the Korean won, Citi said, citing the average of past four weeks of money flows.

“Any disappointment from the summit could cause an unwind of such bullish positions. On the other hand, a successful summit could trigger a faster conversion into the Korean Won of foreign currency deposits.”

Many analysts said the bar was pretty low for what would be deemed a “successful” summit, given the past failures in talks with North Korea.

“So today, we have the opportunity for a historic meeting, a possible end to the Korean war, and a possible move to denuclearise, and maybe even demilitarise the Korean peninsula,” said Robert Carnell, chief economist Asia-Pacific at ING.

“All of that’s great, but how can you make money from it? Well, the short answer is you probably shouldn’t even try.”

Carnell said a far bigger “existential global threat” was the ongoing tariff dispute after Trump upset the Group of Seven’s efforts to show a united front, choosing to back out of a previous joint communiqué.

The action drew criticism from Germany and France, and Trump called Canadian Prime Minister Justin Trudeau “very dishonest and weak”.

G7 jolt

However, “markets are generally shrugging off the G7 trainwreck”, said Ray Attrill, head of forex strategy at National Australia Bank.

Instead, they are looking ahead to a busy week.

Tuesday’s North Korea summit will be followed by policy meetings of the US Federal Reserve, which is expected to raise rates, and the European Central Bank, as well as a Brexit bill vote in the British parliament.

The dollar was well bid on Tuesday, with the dollar index up 0.2% against a basket of major currencies.

Against the safe-haven yen, the dollar jumped to a three-week high of ¥110.49 in early deals. It was last at ¥110.28.

Helping calm markets were comments from Italy’s new coalition government that it had no intention of leaving the eurozone and that it planned to cut debt.

The euro stepped back from a three-week high of $1.1840 to be last down 0.2% at $1.1763.

In commodities, US crude rose 6c to $66.16 a barrel, while Brent dipped 1c to $76.45.

Spot gold slipped 0.2% to $1,297.42 an ounce.

Reuters