Asian shares, dollar rally as North Korea blinks

Asian shares rallied and the dollar firmed on Tuesday after North Korea's leader signalled that he would delay plans to fire a missile near Guam, easing tensions and prompting investors to move back into beaten-down riskier assets.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS extended early gains and rose 0.4 percent by late morning, with Australia up 0.7 percent. South Korea's markets were closed for a holiday. 

Helped as well by a weaker yen, Japan's Nikkei stock index .N225 was 1.3 percent higher at the end of morning trading, a day after skidding 1 percent to a 3-1/2 month low. 

On Wall Street on Monday, U.S. stocks recovered from last week's selloff, when fears of such a conflict helped wipe out nearly $1 trillion from global equity markets. The S&P 500 .SPX posted its biggest one-day percentage gain since April.

North Korea's leader Kim Jong Un received a report from his army on its plans to fire missiles towards Guam and said he will watch the actions of the United States for a while longer before making a decision, the North's official news agency said on Tuesday. 

U.S. President Donald Trump did not have any fresh words for Pyongyang, but Defense Secretary Jim Mattis warned on Monday that the U.S. military would be prepared to intercept a missile fired by North Korea if it was headed to Guam.

The yen tends to gain in times of crisis on assumptions that Japanese investors will repatriate assets.

The dollar was up 0.5 percent at 110.17 yen JPY=, pulling further away from last Friday's low of 108.72 yen, while the euro gained 0.5 percent to 129.80 yen JPYEUR=. 

The euro was flat on the day against the dollar at $1.1784 EUR=, while the dollar index, which tracks the greenback against a basket of six major rivals, added 0.1 percent to 93.480 .DXY.

Higher U.S. yields also gave the dollar a lift. The yield on the benchmark 10-year U.S. Treasury note US10YT=RR rose to 2.243 percent from its U.S. close of 2.218 percent on Monday. 

The dollar rose as traders unwound their bearish bets made last week after Friday's disappointing U.S. inflation data dampened expectations that the Federal Reserve would raise interest rates again this year. 

But New York Fed President William Dudley rekindled rate-hike hopes on Monday, saying that it was not unreasonable to think the central bank would begin trimming its $4.2 trillion balance sheet in September and raise rates again this year, provided economic data holds up. 

Market pricing for the odds of a December hike has moved back to roughly 50-50. 

Crude oil futures steadied after tumbling more than 2.5 percent on Monday in volatile trade.

U.S. crude futures CLc1 rose 7 cents to $47.66 a barrel. Brent crude LCOc1 added 12 cents to $50.85. 

Spot gold XAU= prices fell 0.5 percent to $1,275.62 an ounce, extending their fall from Monday when they shed half a percent.