FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzale/Illustration/File Photo
TOKYO (Reuters) – The dollar edged up to a three-week high against the yen on Tuesday, elevated by hopes that the closely-watched U.S.-North Korea summit can pave the way toward a reduction in tensions between the two old foes.
U.S. President Donald Trump and North Korean leader Kim Jong Un shook hands and smiled as they started a historic summit in Singapore on Tuesday, as both sides seek to narrow differences over how to end a nuclear standoff on the Korean peninsula.
The historic meeting comes just months after they traded insults and tensions spiraled in the region over North Korea’s nuclear and missile programs as it raced toward the goal of developing a nuclear-tipped missile capable of hitting the United States.
The U.S. currency rose to as high as 110.495 yen, its strongest since May 23.
The greenback was last up 0.3 percent at 110.350 yen, nudged off highs after President Trump tweeted that White House economic adviser Larry Kudlow suffered a heart attack.
The dollar’s rise against the yen, a perceived safe haven often sought in times of political tensions and market turmoil, reflected optimism that the Trump-Kim summit would open the door to the eventual denuclearization of North Korea.
“The dollar is enjoying a lift against the yen after breaking above the 200-day moving average (at around 110.19 yen) threshold amid a generally risk-on mood,” said Shin Kadota, senior strategist at Barclays (LON:BARC) in Tokyo.
“And while an encouraging U.S.-North Korea summit outcome would be supportive for the dollar, participants may opt to wait out the next big event, the FOMC (Federal Open Market Committee) meeting before committing themselves.”
The U.S. Federal Reserve holds a two-day meeting starting on June 12, and it is widely expected to raise interest rates for the second time this year. The focus is on whether the central bank will hint at raising rates a total of four times in 2018.
The European Central Bank also meets on June 14, when it could signal intentions to start unwinding its massive bond purchasing program.
The Bank of Japan also concludes a two-day meeting on Friday at which it is widely expected to keep its loose monetary policy intact.
Against a buoyant dollar, the euro was 0.35 percent lower at $1.1744 (EUR=).
The single currency reversed modest gains made on Monday after assurances from Italy that it would not leave the European Union calmed investors’ nerves.
The dollar index against a basket of six major currencies climbed 0.3 percent to 93.855 (DXY).
The Australian dollar slipped 0.3 percent to $0.7586, pressured by the dollar’s broad strength.