US Dollar Weakens on Lingering Geopolitical Risks and Lackluster Data

The US dollar moved lower against the euro and the Japanese yen on Friday after an exchange of threats continued between the United States and North Korea. Today’s economic releases provided the greenback little support as the US manufacturing activity edged marginally higher while activity within the services sector dropped.

The geopolitical tension between the United States and North Korea reached a new level today after the isolated Asian nation threatened to detonate a hydrogen bomb over the Pacific Ocean.

The latest escalation was a response to the comments made by US President Donald Trump during his speech to the United Nations General Assembly. Trump said that the United States may have to destroy North Korea if the latter appeared to be a real threat to the United States or its allies.

Ahead of the nuclear detonation threat, North Korea’s leader Kim Jong-un delivered a statement that promised the highest level of hard-line countermeasure. The statement also called Trump a mentally deranged US dotard in response to Trump’s speech, during which the US president described Kim Jong-un as a rocket man.

North Korea’s foreign minister Ri Yong Ho said to reporters that the hydrogen bomb that the nation is considering would be of an unprecedented scale. The foreign minister added that he has no further details on Kim’s exact plans.

On September 3, Pyongyang tested its sixth nuclear test, which was the nation’s largest to date. North Korea also fired more missiles this year to accelerate a program that aims to target the United States and Japan.

Trump was quick to respond to the latest threat. The US president wrote on his Twitter account that Kim is obviously a madman who does not mind starving or killing his own people.

The exchange of mocking comments and threats raised demand for safe haven assets like the Japanese yen and the Swiss franc. Meanwhile, the greenback failed to gain ground following lackluster economic data in the United States.

IHS Markit said that a fresh reading for the manufacturing purchasing managers’ index showed a level that matched estimates at 53.0 in September. The reading was marginally higher than the index’s level in August. The services purchasing managers’ index, on the other hand, declined to 55.1 this month from 56.0 last month, despite expectations of a smaller drop to 55.9.

EUR/USD traded at 1.1967 at 15:45 GMT on Friday after touching 1.1994 at 09:55 GMT, the pair’s highest level since September 22. EUR/USD began trading today at 1.1942. USD/JPY was at 112.00 after dropping to 111.71 at 02:55 GMT, the lowest rate since September 20. USD/JPY started the day at 112.46.

The Dollar Index, which tracks the performance of the US currency against its major peers, dropped to 92.03 as of 15:41 GMT today from 92.25 yesterday.

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