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Dollar rises ahead of key policy gatherings, as U.S., North Korea hold historic summit

Barbara Kollmeyer

Consumer prices on tap for currency traders

Getty ImagesDollar extends rally

A popular measure of the U.S. dollar climbed to its best level in four sessions early Tuesday in New York ahead of key central bank meetings, starting later today with the Federal Reserve, which could influence currency trade. A highly anticipated summit between U.S. and North Korean leaders held in Singapore also was in focus for currency traders.

What are currencies doing?

The ICE U.S. Dollar Index (IFUS:DX-Y.NYB) which measures the buck against six rivals, was up 0.2% to 93.720, the index’s strongest level in four sessions. The gauge moved off session highs of around 93.89 seen earlier in Asia. The WSJ Dollar Index (CALCULATED:BUXX) a broader gauge of the greenback, rose 0.1% to 87.11.

The dollar’s biggest gains were seen against the perceived safe-haven Japanese yen (USDJPY)(JPY), with the buck buying ¥110.39, compared with ¥110.02 late Monday in New York.

The euro (EURUSD) fell to $1.1769 from $1.1785 late Monday in New York. The euro was boosted Monday by comments from Italy’s Economy Minister Giovanni Tria who said that the country’s new coalition government was committed to the euro

Against Canada’s currency (USDCAD)(CAD) which has been under pressure recently over trade tensions, the greenback was modestly higher at C$1.2990 from C$1.2980 late Monday.

The South Korean won, in focus given the Singapore summit between President Donald Trump and North Korea’s Kim Jong Un, was strengthening. The dollar last bought (USDKRW)(KRW) 1,073.03 won, down from 1,076.86 won late Monday in New York.

The British pound (GBPUSD) fell to $1.3363 from $1.3380 Monday. The pound tumbled Monday after data showed a sharp decline in U.K. factory output, something that could cast doubt on future interest-rate increases from the Bank of England. Meanwhile, investors also are watching a parliamentary vote on a final deal as the U.K. exits from the European Union.

Also see:Why emerging-market investors are swooning over Colombia’s peso

What’s driving the market?

Trump and Kim signed a denuclearization agreement as part of a historic meeting between Trump and Kim, featuring a handshake between the former antagonist and culminating in the signing of an agreement declaring plans for the “complete denuclearization of the Korean peninsula.” However, the pact was criticized for offering few specifics about the steps that would be taken by the Korean dictator to surrender weapons. Still, the U.S. president predicted the countries would have a “terrific relationship.” It marks the first meeting between a sitting U.S. president and a North Korean leader.

The trade front appeared to calm somewhat after verbal clashes between Trump and Canadian Prime Minister Justin Trudeau after the G-7 summit, from which Trump withdrew his support for the group’s communiqué. The loonie got caught in the middle of the tensions, pitching lower on Monday.

Read:A pumped-up U.S. economy does have some downsides. Here are two of them.

The barrage of geopolitical events come ahead of a series of key meetings of central banks. The U.S. Federal Reserve’s two-day policy gathering kicks off Tuesday, which is widely expected to result in a quarter-point increase in interest rates to the federal-funds rate to a range between 1.75% and 2%. Meanwhile, the European Central Bank is slated to discuss a schedule for the eventual end of its bond-buying program at its Thursday gathering, while the Bank of Japan is also due to convene on Friday.

Don’t miss:Investors brace for week packed with Fed, ECB and North Korean drama

What are strategists saying?

“The dollar has been a notable gainer overnight, strengthening against its peers as the historic meeting went ahead. Trump had been managing expectations by setting the bar low moving toward the summit and the fact that the tone was upbeat (and a vast improvement on the G-7) lifted the dollar to a four-session high in the Asian session,” noted Jasper Lawler, head of research at London Capital Group.

“Core CPI is expected to have ticked higher in May to 2.2%, up from 2.1% pointing to increased price pressures for yet another month. A strong reading could fuel speculation of a more hawkish Fed, as policy makers meet for the FOMC, boosting the appeal of the dollar further before the rate decision on Thursday,” added Lawler.

What data are in focus?

Data will swing into focus for Tuesday, with consumer prices for May due at 8:30 a.m. Eastern Time, along with the Federal budget at 2 p.m.

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.

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