Dollar rebounds, Asia stocks gain as North Korea missile fears recede

By Nichola Saminather

SINGAPORE (Reuters) - The dollar rebounded from a 2-1/2-year low on Wednesday, and Asian stocks took their cue from Wall Street's stronger close, as concerns about North Korea's firing of a missile over Japan ebbed.

European stocks are also set for a positive start, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 (FTSE) to open up 0.35 percent. Germany's DAX (GDAXI) and France's CAC (FCHI) are expected to begin the day 0.5 percent higher.

The dollar index (DXY), which tracks the greenback against a basket of six major peers, edged up 0.1 percent to 92.332.

The dollar rose 0.1 percent to 109.79 yen . On Tuesday, after slumping to a 4-1/2-month low versus the safe haven currency, the greenback closed up 0.5 percent.

The yen tends to benefit during times of geo-political or financial stress because Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds in a crisis.

"Calmer heads have prevailed once again in financial markets, with traders seemingly happy to cover short positions and add a touch of risk into their portfolio," said Chris Weston, chief market strategist at IG in Melbourne.

The South Korean won strengthened 0.4 percent, with the dollar buying 1,122.2 won, recovering some of Tuesday's 0.6 percent slide.

The United Nations, in a statement drafted by the United States, condemned the North Korea's latest missile launch but held back any threat of new sanctions against Pyongyang.

Markets appeared to have dismissed North Korea's statement on Wednesday that the test was a first step in military action in the Pacific to "contain" the U.S. territory of Guam.

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

Currency traders are now looking to U.S. non-farm payrolls data for August, due on Friday, following data that showed U.S. consumer confidence surged to a five-month high in August as the labor market improved and house prices rose.

"The market tone markedly improved as traders adopted a 'this too shall pass' attitude," said Stephen Innes, head of Asia Pacific trading at OANDA in Singapore.

"A boisterous U.S. consumer confidence number, coupled with a much tamer response than anticipated from President Trump may explain part of the reversal."

U.S. 10-year Treasury yields (US10YT=RR) were at 2.1466 percent on Wednesday, after touching a 9-1/2-month low of 2.086 percent on Tuesday.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) advanced 0.6 percent.

South Korea's KOSPI share index (KS11) rose 0.1 percent, while Australian shares (AXJO) were little changed.

Japan's Nikkei (N225) rose 0.7 percent.

Japanese retail sales growth slowed in July but still grew for a ninth consecutive month, suggesting the underlying trend for consumption remains healthy.

However, household spending unexpectedly fell in July, injecting some caution into the debate about whether domestic demand can continue to drive growth.

Chinese blue chips (CSI300) rose slightly, and Hong Kong's Hang Seng (HSI) climbed 0.9 percent.

In commodities, gasoline hit a two-year high after Hurricane Harvey shut down nearly a fifth of U.S refining capacity, and more closures are expected.

U.S. gasoline futures (RBc1) rose 3.1 percent to $1.838, bringing gains this week to 10.3 percent.

The rise in crude inventories as a result of refinery shutdowns, however, weighed on oil prices.

U.S. crude futures (CLc1) fell 0.3 percent to $46.32 a barrel, after touching a five-week low on Tuesday.

Global benchmark Brent (LCOc1) slipped 0.4 percent to $51.79.

Spot gold inched up 0.2 percent to $1,311.77 an ounce on Wednesday. On Tuesday, the precious metal jumped to its highest since Trump was elected U.S. president, before closing flat.