The dollar was steady at slightly higher levels against the euro, after North Korea's missile tests overnight unsettled markets. The tests put Asian stock markets and currencies under pressure, leading into flows into the dollar and gold. The yen was among the hardest hit. The dollar's gains were limited, however, and the US currency pared gains "as the realisation dawned that the US will inevitably have to take a major role in tackling the issue," said Steve Pearson at HBOS. North Korea launched up to six missiles early today, even as the US marked a public holiday. One of the missiles was reportedly a long-range Taepodong-2, believed to be capable of reaching the US state of Alaska and possibly Hawaii. However, according to the US military said the Taepodong-2 missile launch failed on its own in the early stages and landed in the Sea of Japan. BNP Paribas analysts believe the effects of North Korea's missile tests may not have a lasting impact despite rating agency Fitch's assertion that regional stability could be dented, leading to adverse effects on South Korea's ratings. They pointed out that the Swiss franc, the favoured currency in times of increased geopolitical risk did not react to the news. Meanwhile, Pearson at HBOS pointed out the North Korean episode may well lead to renewed risk aversion. "We are inclined to view the North Korean episode as a potential catalyst to start the next leg lower," he said. Over in Europe, the euro got a fillip in European trading after a stark reminder that the economy in the 12-nation single currency area continues to improve rapidly. The euro-zone services sector, which makes up the bulk of overall GDP, hit a high not seen in six years, strengthening further expectations of rate hikes in the coming months. The European Central Bank will deliver its interest rate decision tomorrow but no change is expected until end August. "Firm data is required to validate the current market expectation of a very hawkish steer from ECB President Jean Claude Trichet at tomorrow's ECB press conference," said Pearson at HBOS. The euro's fortunes will be inexorably linked to the tone taken by Trichet. If he signals vigilance on the inflation front, the euro will likely get a boost. Later today, attention will fall on the US equivalent of the services PMI. A weak number will weigh on the dollar. Beyond today, focus will be on the US jobs report on Friday, where markets will be watching for signs that the economy is cooling. Elsewhere, the pound firmed slightly after a mixed services sector report June. The UK services sector purchasing managers' index fell to a seasonally adjusted 58.7 in June from 59.2 in May. Economists polled by AFX News had forecast a more modest fall to 58.9. However, there were rises in the sub-indices measuring employment and prices paid. Howard Archer at Global Insight said that the report remains "pretty robust" if "somewhat mixed." He pointed out that new orders growth and business expectations slipped back in June, but that both remain at high levels. Meanwhile, there were also improvements in employment growth and outstanding business. Additionally, the Bank of England will be relatively pleased to see that the prices charged index edged back in June. This suggests that service companies took an even bigger hit on margins as input prices rose at their fastest rate since November 2004, said Archer. "Overall, the services survey will do little to alter the view that interest rates will rise, but probably not in the near term," he added.