Dollar starts week under shadow of underwhelming data, N. Korea

TOKYO: The dollar started the week on the defensive on Monday after U.S. economic data came in shy of expectations and another missile test by North Korea at the weekend underpinned the perceived safe-haven yen.

The dollar index, which tracks the greenback against a basket of six major peers, was 0.1 percent lower on the day at 99.152

The dollar slipped slightly to 113.34 Japanese yen.

On Monday, North Korea said it had successfully tested  a newly developed mid-to-long range missile on Sunday, supervised by leader Kim Jong Un and aimed at verifying its ability to carry a "large scale heavy nuclear warhead," according to the North's official KCNA news agency.

The North fired a ballistic missile that landed in the sea near Russia on Sunday in a launch that Washington called a message to South Korea, days after its new president took office pledging to engage Pyongyang in dialogue.

U.S. data on Friday showed a smaller-than-expected 0.4 percent increase in April retail sales from March, while a disappointing consumer prices report raised concerns for the retail sector and the broader economy.

"The data was weaker than expected, but not weak enough to keep the dollar under pressure for long," said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.

"The North Korean missile news over the weekend gave the yen some lift, but not much," he said. "Overall, we see the dollar trading in its recent ranges for the time being, with investors focused on next month's Federal Open Market Committee meeting."

The Federal Reserve is widely expected to raise interest rates at that meeting and has forecast two more hikes this year following its a quarter point increase in March.

North Korea remained a major concern for investors ahead of the Fed meeting, said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings in Tokyo.

"If the Korean tensions escalate, we could see the dollar break into the 112 range against the yen," and further downside U.S. data surprises would also weigh on the U.S. currency, she said.

But as long as investors are still positioned for another Fed hike, "it is difficult to sell the dollar too far for now, and it will probably stick to a range," she added.

Net dollar long positions fell in the week ended May 9 to their lowest since early October, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

In that week, the euro marked its first net long positioning since early May 2014, as investors breathed a collective sigh of relief following pro-European Emmanuel Macron's victory over anti-EU candidate Marine Le Pen in the second round of France's presidential election on May 7.

The euro edged down 0.1 percent to $1.0924.

The positioning data also showed speculators are net long Australian dollars, which helped that currency move away from last week's four-month lows.

The Aussie was up 0.2 percent at $0.7396, also getting a lift from firmer commodities prices. Oil prices jumped on Monday after the energy ministers of top producers Saudi Arabia and Russia jointly said that an OPEC-led crude production cut would be extended from the middle of this year until March 2018.

Stronger oil prices also bolstered the Canadian dollar. The U.S dollar sagged 0.2 percent to C$1.3678, moving away from a 14-month peak of C$1.3793 scaled earlier this month.