The dollar lost its grip on earlier gains against the yen on Wednesday, remaining under pressure after North Korea fired a ballistic missile into the sea ahead of a summit between US and Chinese leaders. Pyongyang's test-fire came just a day before US President Donald Trump and his Chinese counterpart Xi Jinping meet for talks on economic and security issues, and will include persuading North Korea to curb its arms development.
Though the perceived safe-haven Japanese currency tends to gain in times of geopolitical tension or risk aversion, the dollar got some help from Japanese importers on a "gotobi" date - the fifth day of the month and dates that are multiple of five- on which accounts are traditionally settled. "Today, there is real demand for the dollar, on 'gotobi,' so its downside should be limited," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
But the concerns about the upcoming China-US summit undermined the greenback, which is also under pressure from rising speculation that Trump will face challenges implementing his promised growth-boosting policies in the wake of his administration's failure to pass healthcare reform. "People want to wait and see how Trump can carry out his promises when it comes to infrastructure" and tax reform, Ogino added.
The dollar edged down 0.1 percent to 110.64 yen, off from a session high of 110.92 and well below last Friday's 10-day peak of 112.19 yen. The dollar index, which tracks the US currency against a trade-weighted basket of six peers, was slightly down on the day at 100.52, as slumping US Treasury yields also gave investors little incentive to buy the greenback.
The benchmark US Treasury yield touched its lowest levels since February in overnight trade. It last stood at 2.349 percent in Asian trading, not far from its US close of 2.350 percent. It had been trading at levels above 2.40 percent as recently as Monday. Yields edged down as investors sought safety, even as investors expect more interest rate increases by the Federal Reserve this year. Solid US data on Tuesday reinforced those expectations, showing the country's trade deficit fell more than expected in February, while separate figures showed factory orders rose for the third straight month. Last week, Trump ordered a probe of the causes of US trade deficits and tough measures for countries that evaded import duties.
"The foreign exchange market's main focus remains whether or not Trump can carry out his policies, and whether the US economy will stay strong enough for the Fed to stick to the path of rate hikes," said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings. "Therefore, this week's US jobs figures are still very important," she said.
Economists polled by Reuters predict the US economy will have added 180,000 jobs in March. The euro, meanwhile, edged up slightly to $1.0674 after plumbing a three-week low of $1.0636 on Tuesday. The Australian dollar also crept higher to $0.7564, pulling away from a three-week low of $0.7545 hit in the previous session when investors pared bets that the Reserve Bank of Australia would hike rates this year. Australia's central bank held rates steady for an eighth month on Tuesday as widely expected, but expressed concerns over soaring property prices and weak employment conditions.
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