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EUR/USD Lower, North Korea Tensions Support Yen

Euro at fresh 4-week lows, yen remains supported amid North Korea tensions

Investing.com - The yen remained supported on Tuesday amid heightened tensions on the Korean Peninsula, and as investors awaited fresh indications on the direction of U.S. monetary policy.

USD/JPY was trading at 111.73 03:56 AM ET (07:56 GMT) after falling as low as 111.47 overnight.

Demand for the safe haven yen continued to be underpinned after North Korea's foreign minister said on Monday that U.S. President Donald Trump had declared war on the country and that Pyongyang reserved the right to shoot down U.S. bombers.

The yen is often sought in times of geopolitical tension or market turbulence because Japan has a large current account surplus and traders tend to assume Japanese investors would repatriate funds at times of crisis.

The euro fell to fresh four-week lows against the dollar, with EUR/USD down 0.3% to 1.1811 after ending the previous session down 0.6%.

The single currency remained on the back foot after German Chancellor Angela Merkel won weekend elections but saw large numbers of voters desert her party for the far right. Merkel now faces months of coalition talks to try to form a stable government.

Sentiment on the euro was also hit after European Central Bank President Mario Draghi said Monday that that "ample" ECB accommodation was still needed and added that currency volatility is a source of uncertainty that requires monitoring.

The euro was also lower against the stronger yen, with EUR/JPY down 0.21% at 132.09.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.21% at 92.62, boosted by the weaker euro.

Investors were looking ahead to a speech by Fed Chair Janet Yellen later in the trading day after the U.S. central bank indicated last week that it is still on track for a third rate hike before the years end.

Meanwhile, the New Zealand dollar was lower, with NZD/USD down 0.66% at 0.7225, adding to the previous day’s losses.

The kiwi came under pressure after New Zealand Prime Minister Bill English's National Party won weekend elections but failed to secure an outright majority, leaving investor’s likely facing weeks of uncertainty before a government is formed.

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North Korea risks support yen, euro struggles near 4-week lows vs dollar