Investing.com - The dollar slumped against a basket of major currencies on Tuesday, as the 'flight to safety' sentiment began to set in for investors amid rising geopolitical tensions.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.33% to 100.61 by 12:54 EDT.
In the absence of top-tier market moving economic data on Tuesday, rising geopolitical events remained front and center, as investors poured into safe-haven assets, after expectations grew the U.S. may take military action against North Korea.
The U.S decided to move a Navy strike group toward the Korean peninsula amid continued missile tests by North Korea.
Meanwhile, President Donald Trump tweeted on Tuesday, "North Korea is looking for trouble" and signalled that the U.S. is prepared to solve the problem on its own, should China decline to offer assistance.
Elsewhere, further signs of ‘a flight to safety’ surfaced Tuesday, after demand for U.S. treasuries soared, which further suppressed yields – the U.S. 10-Year fell to a session low of 2.293.
The slump in the dollar reflected some analysts’ commentary on the short-term trend for the greenback, after Morgan Stanley noted in a research report to clients that “USD positioning is short but warned that “sentiment has improved in recent trading sessions”.
The yen, a safe-haven currency, was one of the main gainers of the session, benefitting from the ‘flight to safety’, as USD/JPY slumped by 1% to 109.81.
EUR/USD traded at $1.0612, up 0.14%, while EUR/GBP lost 0.41% to 0.8502.
GBP/USD added 0.55% to $1.2483, while USD/CAD traded flat $1.3325.
A speech by Federal Reserve Bank of Minneapolis President Neel Kashkari is on tap for 13:45 EDT, and is expected to be closely monitored by investors for clues regarding future monetary policy.