By Richard Leong
NEW YORK (Reuters) - The dollar slipped to a one-week low on Tuesday against a basket of currencies as traders piled back into riskier currencies after an agreement between North and South Korea to hold direct talks.
The dollar had already been weakening on worries about a trade war due to U.S. President Donald Trump's proposed tariffs last week on imported steel and aluminum.
The U.S. currency, seen as a safe-haven against risk in recent months, fell further after news of the North and South Korea talks as investors bought the Australian and New Zealand dollars and emerging market currencies.
"It's too early to wholeheartedly buy these currencies because of the chances of escalating trade tension between U.S. and its trading partners," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
North and South Korea, still technically at war but enjoying easing tension since the Winter Olympics in the South last month, will hold their first summit in more than a decade next month, South Korea said on Tuesday.
It also said North Korea is willing to hold talks with the United States on denuclearization and will suspend nuclear tests while those talks are under way.
This offset worries about Trump's proposed levies, which has prompted protests from Europe, Canada and other countries.
At 11:09 a.m. (1609 GMT), the dollar fell 0.557 points or 0.62 percent, against a group of currencies (DXY) to 89.523.
It also touched its weakest level against the South Korean won
Among higher-yielding currencies, the New Zealand dollar was up as much as 1.2 percent on the day
Against the yen - traditionally seen as a safe haven - the dollar had slipped as low as 105.86 yen
The euro (EUR=) rebounded to a two-week high of $1.2414 on Tuesday after a selloff on Monday following elections in Italy and Germany.