Reuters: Asian stocks handed back earlier modest gains and drifted lower on Monday, running short of incentives to push past two-year highs with many key markets closed for holidays.

The pound, meanwhile, nursed losses after a poll showed a shrinking lead for Prime Minister Theresa May’s party in Britain’s upcoming elections. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2%. Taking cues after the S&P 500 and Nasdaq scraped to record closing highs, it had earlier risen towards a two-year peak marked on Thursday.

Japan’s Nikkei edged up 0.1% while weaker commodities pushed down Australian shares 0.5%. The closure of Chinese, British and U.S. markets on Monday deprived investors of potential catalysts and kept overall trading subdued.

Brushing aside a North Korean missile launch, South Korea’s KOSPI initially touched an intraday record high before pulling back 0.1%. It was on track to snap a six-day winning streak.

Pyongyang fired what appeared to be a short-range ballistic missile early on Monday.

The dollar index against a basket of major currencies was steady at 97.465 after rising on Friday thanks to upbeat U.S. gross domestic product data.

The index fell to a 6-1/2-month low below 97.00 a week ago on US political concerns centered on President Donald Trump, but have since crept back.

The dollar and US stocks would face downward risks if trouble for the Trump administration becomes a long-term concern, said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

“That said, the possibility of the president actually being impeached remains very low, and any negative pressure on US stocks has been limited so far.”

The greenback was steady at 111.290 yen, with the safe-haven Japanese currency showing little reaction to North Korea’s missile launch.

“While the North Korean situation remains tense, the market has gotten used to missile launches, with broader volatility also declining,” said Shusuke Yamada, senior strategist at Bank of America Merrill Lynch in Tokyo.

“The US markets will also be shut today, and that is curbing incentive and restricting overall movements as well.”

The pound was a shade higher at $1.2828 after dropping more than 1% on Friday to as low as $1.2775. Sterling suffered its steepest fall since January on Friday after an opinion poll showed the governing Conservatives’ lead over the Labour opposition down to just five percentage points with less than two weeks before a general election. The euro declined 0.1% to $1.1165. The common currency had soared to a 6-1/2-month high of $1.1268 last week on factors including relief at the French presidential election outcome, but it has failed to make further headway.

Spot gold hovered close to a near four-week high of $1,269.50 an ounce hit on Friday, led higher by investors who feared political risks. 

Asian currencies subdued; shrug off North Korea missile test

Reuters: Asian currencies paled against a stronger US dollar on Monday, with markets little fazed by a ballistic missile test by North Korea, but trading was subdued as key financial markets were closed.

The dollar index was up about 0.03% against a basket of currencies, extending Friday’s rally when it hit a one-week high on positively revised U.S. gross domestic product data.

The U.S. economy slowed less than initially thought in the first quarter, with gross domestic product increasing at a 1.2% annual rate, the Commerce Department said on Friday in its second GDP estimate for the quarter.

“We can see some declines in other currencies, which is possibly due to a firm dollar index after last Friday,” said Gao Qi, an FX Strategist at Scotiabank.

Earlier in the session, North Korea fired about one short-range ballistic missile that landed in the sea off its east coast, the latest following two successful tests of medium-to long range missiles in defiance of world pressure and threats of more sanctions.

“I think the impact from the launch is muted, quite limited,” Gao Qi added. “You can see that the Korean won rebounded slightly.”

Investors are also awaiting China’s official factory activity data, due on Wednesday, which is expected to show the slowest pace of growth in eight months, according to a poll by Reuters.

Analysts expect China’s overall economic growth to slow gradually over the rest of the year, as authorities tighten regulations to deter riskier lending and as the impact of earlier stimulus measures begins to fade.

The Singapore dollar was down about 0.2% against the dollar, its biggest percentage loss in nearly a week. It had gained about 0.4% in the previous session after data showed the island state’s manufacturing output in April rose 6.7% from a year earlier. The Thai baht fell as much as 0.27% in its biggest percentage loss in nearly three weeks. The currency rallied about 0.6% on Friday. The yuan and the Taiwan Dollar did not trade on account of domestic holidays.

The Korean won rose as much as 0.2% on Monday after having added about 0.6% last week on the back of strong inflows.

South Korean shares rallied for a seventh day to mark another intraday record, tracking Wall Street’s performance on Friday.

US markets were closed for a public holiday.

While Korean assets are being underpinned by continued inflows, analysts believe month-end dollar selling is helping the won rebound, albeit slightly.