SYDNEY, June 12 2018 : The dollar jumped to a 3-week top today while Asian stocks edged up as a highly anticipated U.S.-Korea summit got underway in Singapore, potentially paving the way to ending a nuclear stand-off on the Korean peninsula.
U.S. President Donald Trump and North Korean leader Kim Jong Un shook hands and smiled as they started the historic summit, just months after they traded insults and tensions spiraled in the region over North Korea’s nuclear and missile programs
Trump told Kim “we will have a terrific relationship” amid handshakes, 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.
Trading was volatile as MSCI’s broadest index of Asia-Pacific shares outside Japan seesawed between positive and negative territory. It was last up 0.1 percent, while Japan’s Nikkei.N225 pared early gains to be up 0.6 percent.
Ahead of the summit, Trump had said the meeting could “work out very nicely” as the countries try to narrow differences on how to end a nuclear standoff on the Korean peninsula.
Many analysts said the bar was pretty low for what will 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 denuclearize, and maybe even demilitarize the Korean peninsula,” said Robert Carnell, chief economist Asia-Pacific at ING.
Carnell said the impact from an end to the nuclear stand-off and a possible end of sanctions on North Korea is likely to be “marginal” on future trade and corporate earnings.
Instead 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 communique.
The action drew criticism from Germany and France, and Trump called Canadian Prime Minister Justin Trudeau “very dishonest and weak.”
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.
Today’s North Korea summit will be followed by policy meetings of the U.S. 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 greenback was well bid this morning, with the dollar index up 0.3 percent against a basket of major currencies.
Against the safe haven yen, the dollar jumped to a three-week top JPY= of 110.49. It was last at 110.32.
Helping calm markets were comments from Italy’s new coalition government that it had no intention of leaving the euro zone and planned to cut debt.
The euro EUR= stepped back from a three-week high of $1.1840 to be last down 0.2 percent at $1.1757.
Spot gold slipped 0.2 percent to $1,297.7 an ounce. – Reuters