SYDNEY (Reuters) – The dollar jumped to a 3-week top on Tuesday while Asian shares started cautiously as investors were hopeful of a positive outcome from a highly anticipated U.S.-Korea summit, which could set the stage for ending a nuclear stand-off on the Korean peninsula.
Japan’s Nikkei .N225 climbed 0.8 percent to the highest in three weeks and South Korean shares added 0.1 percent. Australia’s benchmark index was a tad firmer while New Zealand eased 0.3 percent .NZ50.
That left MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS a touch softer at 573.31.
The historic meeting between U.S. President Donald Trump and North Korea’s Kim Jong Un is due to start at 0100 GMT in Singapore.
Ahead of the summit, Trump 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.
“This seems to be the first step on the road in what is going to be a long drawn out process,” said Ray Attrill, head of forex strategy, National Australia Bank, Sydney.
“If there appears to be a genuine intent on both sides to use this summit as a platform for a serious negotiation of a peace treaty, I guess that’s what success would look like today,” he said.
“Nobody is expecting a peace treaty today, that is being overly optimistic. But if this turns out to be a complete failure there might be some implications for risk assets.”
A denuclearization deal would be positive for South Korean assets given the possible boost to growth and fading geopolitical risks, analysts at Goldman Sachs said in a note.
There were some nerves, 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.”
By and large, though, “markets are generally shrugging off the G7 trainwreck,” Attrill said. Instead, they are looking ahead to a busy week.
Tuesday’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 on Tuesday morning, with the dollar index .DXY up 0.1 percent against a basket of major currencies.
Against the safe haven yen, the dollar jumped to a three-week top JPY= of 110.42.
Also 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= hovered near a three-week high of $1.1840. It was last at $1.1773.
In commodities, U.S. crude CLc1 rose 6 cents to $66.16 per barrel, while Brent LCOc1 gained 5 cents to $76.51.
Spot gold was a tad weaker at $1,298.06 an ounce.
Editing by Shri Navaratnam
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