The dollar held steady on Thursday, with investors reluctant to take positions ahead of U.S. trade data that could offer clues on whether the greenback can sustain its recent rally.
The yen dipped and the safe-haven Swiss franc rose slightly after North Korea said it was suspending participation in six-party talks on its nuclear programs and that it has built nuclear weapons for self-defense.
"People are hoping for a better trade number. Lower oil prices should help the deficit to contract a bit," said Lee Ferridge, senior proprietary trader at Rabobank.
"People are focused on the numbers later but the North Korea issue is in the background," he added.
By 3:40 a.m. EST, the dollar was little changed against the yen at 105.62 after rising to a session high around 105.70 yen on the North Korea news.
The U.S. currency was also static against the euro at around $1.2813. Euro buying in the $1.27 region has prevented the dollar from building on its three-month high around $1.2730.
U.S. trade figures for December, due at 8:30 a.m. EST, are expected to show a deficit of $57 billion. That would be narrower than the $60.30 billion recorded in November, which is also expected to be revised downward.
Weekly U.S. jobless claims are also due at 1330 GMT.
AUSSIE SHINES
The Australian dollar was the standout performer, gaining one percent to a two-week high at $0.7796 after strong jobs data fueled talk of a domestic interest rate rise as early as next month. The New Zealand dollar gained 0.5 percent.
"Dollar selling against those is weighing on the dollar generally," said Ferridge.
Sterling was steady ahead of the Bank of England's monthly interest rate decision at 1200 GMT. No rate change is expected.
The dollar had risen to a three-month high against the euro and a two-month peak versus the yen this week as worries eased about the massive U.S. deficits and the focus switched to growth prospects for the world's largest economy.
"We are stuck in narrow trading ranges because nobody wants to take positions before the data," said a dealer at a Japanese bank.
"Given the recent trend of waning pessimism over the U.S. deficit problem, the market could take a larger trade deficit in its stride," the dealer said.
The market was relatively unfazed by news that North Korea had manufactured nuclear weapons but some analysts advised caution.
"Though the rest of the world has expected for some time that North Korea has acquired nuclear weapons, a real escalation of tension in the region would be bearish for the dollar, yen, Korean won and Chinese yuan while being positive for the euro and Swiss franc," UBS said in its morning note to clients.