Dollar Advances From 2015 Low Before UN Meeting on North Korea

(Bloomberg) -- The dollar climbed from a 32-month low as concerns over Hurricane Irma eased and the anniversary of North Korea’s founding passed without a missile test.

The greenback advanced as much as 0.7 percent against the Japanese yen, and Treasury yields rose. Irma was downgraded to a Category 2 storm after making landfall in Florida and traders unwound positions placed on speculation that North Korea would conduct a missile test over the weekend.

“Markets seem to have headed into the weekend priced for the worst -- a North Korean missile test and maximum financial damage from Irma,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “The dollar seems overdue for a bounce. The dollar should return to 109 to 110 yen early in the week.”

The dollar is also supported by “decent” U.S. economic data momentum and a deal between President Donald Trump and the Democrats suspending the debt ceiling to December, Callow said. Still, traders said some short-term accounts took long-yen positions after the state-run Korean Central News Agency said Monday morning that the U.S. will pay a "due price" if harsher sanctions were imposed on North Korea at an expected United Nations Security Council meeting.

Dollar Advances From 2015 Low Before UN Meeting on North Korea
  • USD/JPY rises 0.6% to 108.52, after touching 108.56; Bloomberg dollar index advances 0.2%, rebounding from Friday when it touched the lowest level since Jan. 2015
  • 10-year Treasury yields climb 4 bps to 2.09%
    • Japan backs a U.S. push for the UN Security Council to vote Monday on sanctions curbing oil supplies to North Korea; North Korean scientists behind the Sept. 3 nuclear weapons test were feted with a banquet over weekend
    • Federal Reserve Bank of New York President William Dudley said back-to-back hurricanes in the third quarter could temporarily influence the timing of the next interest-rate increase, although above-trend growth does warrant continued gradual rate hikes
  • EUR/USD down 0.3% to 1.2002, with Asia-based FX traders saying clients are liquidating long positions under Friday’s 1.2015 low ahead of the UN meeting
  • USD/CHF gains 0.6% to 0.9499; approaching the 0.9509 Friday high driven largely by EUR/CHF short unwind
  • Aussie and kiwi reverse small gains driven by China inflation data; early Asian markets react to PBOC removing a reserve requirement on the trading of foreign-exchange forwards, a move that economists say shows an unease with yuan gains
  • WTI crude up 0.6% to $47.77 per barrel
  • Some information comes from FX traders familiar with the transactions, who asked not to be identified because they aren’t authorized to speak publicly