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.
European stocks rose higher, tracking counterparts in Asia and the United States and reversing 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”.
“Instead of the (U.S.) President responding to the escalation via Twitter, as has happened on many recent occasions, the White House issued an official statement to condemn the action,” said IronFX analyst Charalambos Pissouros.
“This may have been interpreted by investors as a sign that the US will approach the situation in a more measured and diplomatic manner, as opposed to raining down ’fire and fury’,” he said.
He was referring to U.S. President Donald Trump’s remarks earlier this month that 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 0.2 percent against the Japanese yen .JPY and against a basket of currencies .DXY.
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.