Dollar recovers on measured U.S. response to North Korea missile test

The dollar came off a 2-1/2-year low and world stocks rose on Wednesday after the United States’ measured response to North Korea’s missile test soothed jittery investors who turned their focus to positive economic data.

Flooding and damage from Tropical Storm Harvey raised the risk of fuel shortages and pushed gasoline futures to their highest since mid-2015, but elsewhere the mood was sanguine. 

Wall Street was set for gains on Wednesday, with stock futures ESc1 pointing to a 0.05 percent rise, following strong sessions in Europe and Asia. 

European and Asian stocks reversed losses from the day before when investors were spooked by Pyongyang’s firing of a ballistic missile over Japan. 

Fears that this could trigger an aggressive response receded on Wednesday after the United Nations - in a statement drafted by the United States - condemned North Korea’s latest missile launch but held back any threat of new sanctions. 

Trump, who has vowed not to let North Korea develop nuclear missiles that can hit the mainland United States, said the world had received North Korea’s latest message “loud and clear”.

He was referring to U.S. President Donald Trump’s remarks earlier this month in which he said he would respond with “fire and fury” if North Korea persisted in threatening his country. 

North Korean media reports on the launch also lacked their usual claims of technical advances, indicating the test may not have succeeded as planned. 

The dollar recovered from a four-month low, rising 0.3 percent against a basket of currencies .DXY and 0.1 percent against the Japanese yen. 

The recovery in the greenback had begun during Tuesday’s U.S. trading session, with data showing U.S. consumer confidence hitting a five-month high and house prices rising again. 

The yield on U.S. 10-year Treasuries US10YT=RR was back up at 2.13 percent, having sunk below 2.10 on Tuesday for the first time since the day after the 2016 presidential election.