LOGO
  • Home
  • Analytics
  • Analysts Opinions

China should be neutral if North Korea fires first on U.S.: Global Times

China should remain neutral if North Korea launches an attack that threatens the United States, a Chinese state-run newspaper said on Friday, sounding a warning for Pyongyang over its plans to fire missiles near the U.S. Pacific territory of Guam.

The comments from the influential Global Times came after U.S. President Donald Trump stepped up his rhetoric against North Korea again on Thursday, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

China, North Korea's most important ally and trading partner, has reiterated calls for calm during the current crisis. Beijing has expressed frustration with both Pyongyang's repeated nuclear and missile tests and with behavior from South Korea and the United States, such as military drills, that it sees as escalating tensions.

"China should also make clear that if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral," the Global Times, which is widely read but does not represent government policy, said in an editorial.

"If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so," it said.

North Korea's state-run KCNA news agency said on Thursday its army would complete plans in mid-August to fire four intermediate-range missiles over Japan to land near Guam.

Trump said North Korean leader Kim Jong Un was not going to get away with his "horrific" comments and disrespecting America.

"Let's see what he does with Guam. He does something in Guam, it will be an event the likes of which nobody's seen before, what will happen in North Korea," Trump told reporters in New Jersey, without offering specifics.

Shortly after Trump spoke, U.S. Defense Secretary James Mattis told reporters the United States still preferred a diplomatic approach to the North Korean threat and a war would be "catastrophic".

Asked if the United States was ready if North Korea made a hostile act, he said: "We are ready."

DRILLS AS TENSIONS RISE

Tension in the region has risen since the reclusive North, which staged two nuclear bomb tests last year and launched two intercontinental ballistic missile tests in July in defiance of world powers. Trump has said he would not allow Pyongyang to develop a nuclear weapon capable of hitting the United States.

On Thursday, U.S. and Japanese troops began an 18-day live fire exercise on the northern Japanese island of Hokkaido, which was to include rocket artillery drills and involve 3,500 troops.

The Northern Viper drills are one of the scheduled exercises that Japan's Self Defence Forces conducts regularly with their U.S. counterparts and are not a response to the latest tensions.

South Korean and U.S. troops are also gearing up for an annual joint drill from Aug. 21, called the Ulchi Freedom Guardian, where up to 30,000 U.S. troops will take part.

South Korean President Moon Jae-in is expected to deliver a speech next week to mark Liberation Day, when the Korean peninsula secured freedom from the rule of Japan. Moon is likely to highlight his policy on North Korea on the holiday, the only one the two Koreas share.

The United States and South Korea remain technically still at war with North Korea after the 1950-53 Korean conflict ended with a truce, not a peace treaty.

The tensions between North Korea and the United States spurred a broad stock market sell-off. The U.S. benchmark S&P 500 stock index (SPX) closed down 1.4 percent, marking the biggest one-day drop since May. Asian shares fell on Friday with South Korea's KOSPI (KS11) down 1.9 percent.

"This situation is beginning to develop into this generation's Cuban Missile crisis moment, with recent leaked intelligence reports alleging that N.Korea now has miniaturized its nuclear warheads, which extends the range of its missiles, and potentially brings U.S. targets into reach," ING's chief Asia economist Robert Carnell said in a research note.

"While the U.S. President insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution," he said.

Former defense officials and experts say any new military conflict with North Korea would likely escalate quickly to the use of nuclear weapons, bringing catastrophic casualties not seen since World War Two and an untold economic impact worldwide.

Guam, a tropical island more than 3,000 km (2,000 miles) to the southeast of North Korea, is home to about 163,000 people. It has a strategically located U.S. air base, a Navy installation that includes a submarine squadron and a Coast Guard group, and roughly 6,000 U.S. military personnel.

Peter Toves, 47, a Guam native who rents out kayaks and jetskis on a private beach, said he feels safe, but threats so specific by Kim were unsettling.

"We're just gonna sit down and barbecue here and have fun. There's nothing we can do, just wait," he said.

Stocks, dollar extend slide as U.S., North Korea tensions intensify

Asian equity markets extended a global slide on Friday as tensions ramped up between the United States and North Korea, sending investors fleeing to less risky assets such the yen and the Swiss franc.

Wall Street closed sharply lower after U.S. President Donald Trump issued a new round of fiery rhetoric, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.

The sell-off is likely to extend into the European session, with financial spreadbetter CMC Markets expecting Germany's DAX and France's CAC 40 to open down about 0.7 percent each and Britain's FTSE 100 to start 0.55 percent lower.

MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.55 percent, its biggest one-day loss since mid-December. It is heading for a 2.5 percent drop for the week.

Japanese markets were closed for a holiday.

Many markets have recently climbed to record or multi-year highs, leaving them vulnerable to a sell-off.

"What has changed this time is that the scary threats and war of words between the U.S. and North Korea have intensified to the point that markets can't ignore it," said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

"Of course it's all come at a time when share markets are due for a correction so North Korea has provided a perfect trigger."

South Korea's KOSPI fell 1.8 percent to an 11-1/2-week low, taking its losses this week to 3.2 percent.

The Korean won also continued to skid, down 0.45 percent to 1,147.2, falling below its 200-day moving average for the first time in a month.

Australian shares were down 1.3 percent, set for a weekly loss of 0.6 percent.

Chinese bluechips lost 1.6 percent, while Hong Kong's Hang Seng was 1.9 percent lower.

If North Korea launches an attack that threatens the United States, China should stay neutral, but if the U.S. attacks first and tries to overthrow North Korea's government, China will stop them, a Chinese state-run newspaper said on Friday.

"This situation is beginning to develop into this generation's Cuban Missile crisis moment," ING's chief Asia economist Robert Carnell wrote in a note.

"While the U.S. President insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution," Carnell said.

Trump's threat earlier this week, to unleash "fire and fury" on Pyongyang if it attacked, was ultimately dismissed as bluster by many investors.

Trump's second warning, however, has shaken markets that have been largely resilient this year, swatting away a slew of risks. These have ranged from an investigation into Russia's possible interference in the 2016 U.S. presidential election, to concerns about China's risky debt levels, to stubbornly low inflation in the U.S.

The CBOE Volatility Index, the most widely followed barometer of expected near-term U.S. stock market volatility, rose the most in about 12 weeks. The index closed at its highest level since Nov. 8, when Trump was elected president.

The Chinese volatility gauge jumped by the most since January 2016 to its highest level in more than seven months.

The MSCI World index slipped 0.15 percent, extending Thursday's 1.1 percent drop, its biggest one-day slide since May 17.

The dollar widened losses against the yen to hit a two-month low. It was down 0.2 percent at 108.98 yen, after retreating 0.7 percent on Thursday.

The yen is perceived as a safe haven because Japan is the world's biggest creditor country and investors there have tended to repatriate funds in times of crisis.

But "the yen may be expected to lose its safe haven status if U.S.-North Korean tensions continue to escalate," leaving the Swiss Franc, and possibly the U.S. dollar, as the remaining beneficiaries of risk aversion, Emmanuel Ng, currency strategist at OCBC Bank in Singapore, wrote in a note.

For now, the dollar remained on the back foot, pulling back 0.1 percent to 0.9635 Swiss francs on Friday, after dropping as much as 1.2 percent to a two-week low overnight.

Disappointing U.S. inflation and jobs data have not helped the dollar.

U.S. producer prices unexpectedly recorded their biggest drop in nearly a year, and the number of Americans filing for unemployment benefits unexpectedly rose last week.

Markets are now awaiting U.S. consumer price data for July, due later in the session.

Spot gold prices were little changed at $1,286.05 an ounce, after touching a two-month high earlier. They have soared over 2 percent in the previous two sessions, and are set for a weekly gain of 2.25 percent.

Crude futures extended losses on fears of slowing demand and lingering concerns over a global oversupply.

U.S. crude was down 0.9 percent at $48.16 per barrel, on track for a weekly loss of 2.9 percent.

Global benchmark Brent also lost 0.9 percent to $51.44, after Thursday's 1.5 percent drop. It is poised to end the week down 1.9 percent.

OIL FALLS FOR THIRD DAY AS DOUBTS OVER OPEC CUTS LINGER

Oil prices were higher on Wednesday, maintaining gains after data from the U.S. Energy Information Administration showed domestic crude supplies fell more than expected last week.

The U.S. West Texas Intermediate crude September contract was at $49.52 a barrel by 10:35AM ET (1435GMT), up 35 cents, or around 0.7%. Prices were at around $49.49 prior to the release of the inventory data

Elsewhere, Brent oil for October delivery on the ICE Futures Exchange in London tacked on 40 cents, or 0.7%, to $52.50 a barrel.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 6.5 million barrels in the week ended August 4.

Market analysts' expected a crude-stock decline of around 2.7 million barrels, while the American Petroleum Institute late Tuesday reported a supply-drop of 7.8 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, increased by 569,000 barrels last week, the EIA said.

Total U.S. crude oil inventories stood at 475.4 million barrels as of last week, which the EIA considered to be at the upper half of the average range for this time of year.

The report also showed that gasoline inventories rose by 3.4 million barrels, disappointing expectations for a decline of 1.4 million barrels.

For distillate inventories including diesel, the EIA reported a fall of 1.7 million barrels.

Elsewhere on Nymex, gasoline futures for September ticked up 1.0 cent, or 0.6%, to $1.613 a gallon, while September heating oil added 0.8 cents to $1.637 a gallon.

Natural gas futures for September delivery rose 5.3 cents, or roughly 1.8%, to $2.873 per million British thermal units.

U.S. stock futures sink as North Korea tensions shake markets

U.S. stock futures pointed to lower open on Wednesday morning, as investors shunned riskier assets amid intensifying tensions between the U.S. and North Korea, with Pyongyang saying it is considering plans to attack Guam.

A spokesman for the Korean People's Army said in a statement that it was "carefully examining" plans for a missile attack on the U.S. Pacific territory, which has a large American military base.

The comments came just hours after U.S. President Donald Trump warned North Korea that any threat to the U.S. would be met with "fire and fury".

The escalating tensions prompted investors to dump assets seen as riskier, such as stocks and high yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold.

The blue-chip Dow futures fell 34 points, or about 0.2%, by 6:30AM ET (1030GMT), the S&P 500 futures dropped 10 points, or around 0.4%, while the tech-heavy Nasdaq 100 futures lost 34 points, or roughly 0.6%.

U.S. stocks closed lower on Tuesday, scaling back from record highs, after Trump's vow to respond aggressively to any North Korean threats triggered a late afternoon selling spree.

On the data front, a report on second-quarter productivity and labor costs is due at 8:30AM ET (1230GMT), followed by wholesale inventories at 10AM ET (1400GMT).

Earnings, likewise, are expected before the bell from retailer Office Depot (NASDAQ:ODP), drug maker Mylan (NASDAQ:MYL) and fast-food chain Wendy’s (NASDAQ:WEN).

Twenty-First Century Fox (NASDAQ:FOX), Planet Fitness (NYSE:PLNT) and Flowers Foods (NYSE:FLO) are among companies reporting after the close.

Among active pre-market movers, shares in Walt Disney (NYSE:DIS) looked set for a down day, losing around 3.5% in premarket action, after it reported revenue that missed expectations late Tuesday.

The media giant also announced plans to end its distribution deal with Netflix and launch its own ESPN and Disney streaming services.

Shares in streaming giant Netflix (NASDAQ:NFLX) fell nearly 4% premarket in response to Disney's announcement.

Priceline (NASDAQ:PCLN) dropped almost 7% ahead of the open. The online travel broker late Tuesday provided weak guidance for its third quarter, despite posting quarterly earnings that topped forecasts.

Shares of Fossil Group (NASDAQ:FOSL) tanked more than 20% after the fashion accessory company reported a wider-than-expected loss per share and revenue that missed Wall Street's views.

Looking to commodities, oil prices posted solid gains as investors looked ahead to the Energy Department's weekly supply report at 10:30AM ET (1430GMT).

U.S. crude was at $49.36 a barrel, up 20 cents, or around 0.4%, while Brent rose 19 cents to $52.33.

Oil falls for third day as doubts over OPEC cuts linger

Crude futures fell for a third day on Wednesday despite a bigger than expected drop in U.S. oil inventories reported by an industry group, with doubts lingering over OPEC's ability to restrain supply as promised.

Benchmark Brent crude was down 27 cents, or 0.5 percent, at $51.87 a barrel at 0233 GMT. In the previous session, it settled down 0.4 percent.

U.S. West Texas Intermediate (WTI) crude was down 21 cents, or 0.4 percent, at $48.96 a barrel, after falling 0.4 percent on Tuesday.

Crude stockpiles in the U.S. dropped more than expected last week as imports declined and refinery runs increased, while gasoline inventories grew unexpectedly, the American Petroleum Institute said late on Tuesday.

Crude inventories declined by 7.8 million barrels in the week to 478.4 million, compared with analyst expectations for a decrease of 2.7 million barrels.

The U.S. Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. ET (1430 GMT) on Wednesday.

On Tuesday, it trimmed its forecast for gains in U.S. oil production for 2018, though it increased its outlook for output growth this year.

"Oil is stuck in a range of $45-$50 for WTI and a bit more for Brent for now," said Bob Takai, president at Sumitomo Corp Global Research in Tokyo.

"That said, U.S. shale production is slowing down a bit, looking at the rig count, as drillers cannot make money when WTI is under $50, so a push higher above $50 is possible."

The market seems immune to bullish signs of falling stockpiles as the Organization of the Petroleum Exporting Countries (OPEC) and other major producers struggle to maintain compliance with a deal to cut output.

A recovery in Libya's oil output and higher production in Nigeria have complicated OPEC's efforts to curb supply, while U.S. shale oil drillers have ramped up production.

Libya and Nigeria are OPEC countries that are exempt from the agreement to limit production through March 2018.

Officials from a joint OPEC and non-OPEC technical committee said on Tuesday that they expect greater adherence to the pact to cut 1.8 million barrels per day in production.

Saudi state oil company Aramco will cut allocations to its customers worldwide in September by at least 520,000 barrels per day (bpd), sources familiar with the matter told Reuters on Tuesday.

"With only a few weeks left of the U.S. summer driving season, investors are starting to debate whether the current OPEC production cuts will offset the subsequent falls in demand in North America," ANZ Research said in a note.

Yen hits eight-week high vs. dollar on latest bout of Korean tensions

The yen hit an eight-week high against the dollar and made broad gains against other peers on Wednesday, reacting to the latest bout of geopolitical tensions stemming from the Korean Peninsula.

North Korea said on Wednesday it is "carefully examining" plans for a missile strike on the U.S. Pacific territory of Guam, just hours after U.S. President Donald Trump told the North that any threat it presented to the United States would be met with "fire and fury".

The dollar weakened against the yen, which is often sought in times of geopolitical tension. The U.S. currency was down 0.3 percent at 109.980 yen, following a retreat to 109.740, its weakest since June 15.

"The market had been complacent for a while regarding headlines from North Korea. So it reacted when the North threatened Guam," said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.

"Few participants, however, think that North Korea would actually strike Guam at this juncture. So the impact is likely to fade eventually."

Market participants' focus has turned to the next trigger points that could heighten geopolitical tensions.

"Dollar/yen has already gone below 110.00 yen, and at this stage we are likely to see the pair begin to bottom out as the market finds time to assess the situation," said Kyosuke Suzuki, director of forex at Societe Generale (PA:SOGN) in Tokyo.

"The next focal point is whether North Korea conducts a nuclear experiment and how the United States responds."

The South Korean won sank more than 0.8 percent to as much as 1,137.3 to the dollar, its lowest since July 14.

The euro was 0.4 percent weaker at 129.135 yen having reached a 1-1/2-year high above 131.00 just a week ago.

The Australian dollar, which rose to a 19-month high near 90.00 yen late in July, was down 0.7 percent at 86.68 yen after slipping to a one-month low of 86.23 yen.

The Swiss franc, another currency that draws demand in times of geopolitical anxiety, strengthened 0.6 percent to 0.9682 franc to pull away from two-month lows of around 0.9770 set the previous day.

The Swiss franc also gained about 0.6 percent against the euro.

Risk sentiment receded, driving down U.S. Treasury yields which in turn weighed on the dollar.

With Asian bourses and U.S. stock futures weakening early on Wednesday, the safe-haven 10-year Treasury yield was last down 3 basis points.

The euro edged down 0.2 percent to $1.1726. The common currency had lost about 0.4 percent overnight after news U.S. job openings surged to a record in June reinforced Friday's robust payrolls data and supported the greenback.

The dollar index against a basket of six major currencies was effectively unchanged at 93.582 after touching an 11-day peak of 93.876 overnight.

Elsewhere, the New Zealand dollar's retreat continued, reaching a three-week low of $0.7309.

The kiwi has been on the back foot all week ahead of the Reserve Bank of New Zealand's (RBNZ) policy decision due on Thursday, when it is widely expected to keep interest rates unchanged at a record low 1.75 percent.

Despite its recent weakening, the New Zealand dollar is still up more than 5 percent this year, setting a 26-month high of $0.7557 in July. Concerns are that the RBNZ will attempt to jawbone the currency and turn more dovish, reinforcing the need for low rates.

The Australian dollar, sensitive to shifts in risk sentiment, was down 0.4 percent at $0.7885.

Oil prices steady as Saudi cuts September supplies

Oil prices steadied on Tuesday after news of lower crude supplies from Saudi Arabia offset higher production from other large exporters including the United States.

Saudi state oil company Aramco will cut allocations to its customers worldwide in September by at least 520,000 barrels per day (bpd), an industry source familiar with the matter told Reuters on Tuesday.

The cut is in line with the kingdom's commitments in a supply reduction pact led by the Organization of Petroleum exporting Countries designed to bolster oil prices that have been depressed for more than three years by a global glut.

But oil production remains high in many parts of the world and prices are still around half the level seen in 2011-2014.

Benchmark Brent crude was up 5 cents at $52.42 a barrel by 0745 GMT. U.S. light crude was 10 cents higher at $49.49.

"Support is coming from a stabilizing U.S. rig count, falling U.S. inventories and the Saudi cut in exports," Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, told the Reuters Global Oil Forum.

"But against this we still have robust production growth from the United States, Libya and Nigeria."

Production from Libya's 270,000 bpd Sharara field is returning to normal after a disruption when protesters broke into a control room, the National Oil Corp said.

OPEC member Libya is exempt from limits on its production and a recovery of the North African country's output has complicated OPEC's efforts to curb supply, fuelling doubts over the effectiveness of the agreed cuts. Libya pumped 1.03 million bpd in July, according to the latest Reuters survey.

OPEC output hit a 2017-high in July and its exports were at record levels.

Officials from a joint OPEC and non-OPEC technical committee are meeting in Abu Dhabi on Tuesday to discuss ways to increase compliance with the deal to cut 1.8 million bpd in production.

The U.S. Energy Information Administration, part of the Energy Department, will release its weekly petroleum status report at 1430 GMT on Wednesday, giving details on stockpiles and refinery runs.

U.S. crude inventories were expected to have posted their sixth straight weekly decline last week, while refined product stockpiles probably fell too, a preliminary Reuters poll showed on Monday.

Oil output in the United States has risen this year, although Baker Hughes data on Friday showed a cut of one drilling rig in the week to Aug. 4.

World stocks shrug off slowing China trade to hit record high

Global stocks inched up to a new all-time high on Tuesday, shrugging off weaker-than-expected China's trade data that clouded an otherwise bright outlook for global growth.

Chinese imports and exports both fell well short of forecasts last month and growth in overall trade, while still a healthy 8.8 percent, was its slowest this year.

However, MSCI's all-country world index ticked up to set a new record high at 480.76 points. It was last up less than 0.1 percent at 480.54 points.

The index, which tracks shares in 46 countries, is on track for longest monthly winning streak since 2003.

Shares across the globe have been hitting record highs in record low volatility supported by a benign environment for global growth.

Ratings agency Fitch this week lifted its outlook for the world economy for this year and next.

"Data continue to suggest a synchronized global expansion across both advanced and emerging market economies. Spill-overs from the rebound in emerging market demand are reflected in the fastest growth in world trade since 2010," said Fitch chief economist Brian Coulton.

European shares edged in and out of positive territory.

The pan-European STOXX 600 index was last down 0.1 percent, led lower by miners.

Energy company shares rose as oil prices steadied from recent falls as sources told Reuters Saudi Arabia would cut crude supplies next month.

MSCI's broadest index of Asia-Pacific shares outside Japan proved relatively resilient, inching up 0.2 percent and back toward decade highs.

South Korea dipped 0.2 percent, while Japan's Nikkei eased 0.3 percent and China's main markets edged up 0.1 percent. Hong Kong's Hang Seng closed up 0.6 percent.

In currency markets, the dollar dipped for a second consecutive day after rising on Friday following stronger-than-expected U.S. jobs numbers, which some analysts said bolstered the case for the Federal Reserve to raise interest rates further.

However, many in markets remain unpersuaded the Fed will increase the cost of borrowing again this year.

St Louis Fed President James Bullard said on Monday the central bank could leave rates where they are for now because inflation was not likely to rise much.

"(They) seemed to oppose further rate hikes. That means they exactly reflect the current market expectations, which are limiting the dollar’s appreciation," wrote analysts at Commerzbank (DE:CBKG) in Frankfurt in a morning note to clients.

"It is still inflation that poses the problem," they added.

The dollar index was down 0.2 percent. The euro gained 0.2 percent to $1.1811 while the yen rose a similar amount to 110.54 to the dollar

Sterling was up 0.1 percent at $1.3045.

German 10-year government bond yields, the benchmark for borrowing costs in the euro zone, held close to their lowest in more than a month, supported by expectations that any withdrawal of European Central Bank stimulus will be gradual.

This view was boosted on Monday by data showing industrial output in the euro zone's biggest economy unexpectedly fell 1.1 percent in June from a month earlier.

Brent crude oil, the international benchmark, rose 16 cents to $52.53 a barrel. An industry source familiar with the matter told Reuters Saudi state oil company Aramco will cut allocations to its customers next month by at least 520,000 barrels a day.

"Support is coming from a stabilizing U.S. rig count, falling U.S. inventories and the Saudi cut in exports," Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, told the Reuters Global Oil Forum.

"But against this we still have robust production growth from the United States, Libya and Nigeria."

Gold rose 0.3 percent to $1,261 an ounce.

Asia stocks buoyant, dollar steadies after solid U.S. job gains

Asian stocks advanced on Monday, taking their cue from Wall Street, while the dollar moderated but retained most of its gains after a stronger-than-expected July job report.

European markets look set to extend the global rally, with financial spreadbetter CMC Markets expecting Britain's FTSE to open 0.3 percent higher, and France's CAC 40 and Germany's DAX to start the day up 0.2 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.6 percent.

That helped lift the MSCI World index 0.2 percent to an all-time high.

Japan's Nikkei was up 0.6 percent.

But Chinese blue chips managed only slight gains, with investors hesitant to stake out fresh positions ahead of a raft of July data due this week and next.

Following July foreign exchange reserves data on Monday, China will release trade data on Tuesday and inflation on Wednesday. Bank lending numbers could come later this week while industrial output, retail sales and investment readings will be released next Monday.

Analysts expect the data will show China's economy carried strong growth momentum into the third quarter.

The dollar eased on Monday following a strong climb on Friday after data showed U.S. nonfarm payrolls rose by 209,000 jobs last month, and June's employment gain was revised higher.

Growing signs of labor market tightness offer Federal Reserve policymakers some assurance that inflation will gradually rise to the central bank's 2 percent target, and likely clear the way for a plan to start shrinking its massive bond portfolio later this year.

But market pricing shows investors are still about evenly divided over whether the Fed will also opt to raise rates again in December.

The dollar was also buoyed by comments from National Economic Council director Gary Cohn that the U.S. administration is working on a tax plan that would bring corporate profits back to the United States.

But Monday's pull back in the dollar backs some views in markets that Friday's rally may not have legs.

The dollar index, which tracks the greenback against a basket of six global peers, inched back 0.2 percent to 93.361. It rallied 0.76 percent on Friday, its biggest one-day gain this year.

The dollar slipped 0.2 percent against the euro to $1.1796 per euro, after surging 0.8 percent on Friday.

The greenback was flat at 110.68 yen, holding Friday's 0.6 percent gain.

"The most logical view here is the moves on Friday were clearly just a sizeable covering of USD shorts, from what was one of the biggest net short positions held against the USD for many years," Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

For the dollar rally to gain momentum, the market needs to change its interest rate pricing, Weston added.

Benchmark 10-year U.S. Treasury notes were flat at 2.2691 percent, and up from Thursday's close of 2.228 percent.

The lift in sentiment from Friday's jobs data also supported Wall Street. The Dow closed 0.3 percent higher, its eighth consecutive record high. The S&P and Nasdaq ended the session up 0.2 percent.

But geopolitical tensions continued to give Asian investors pause.

South Korean President Moon Jae-in and his U.S. counterpart, Donald Trump, agreed to apply maximum pressure and sanctions on North Korea in a telephone call on Monday, while China expressed hope that North and South Korea could resume contact soon.

But North Korea's foreign minister said Seoul's proposals to improve ties with the isolated state show a lack of sincerity when South Korea is also imposing sanctions on the North with the U.S.

The U.N. Security Council unanimously imposed new sanctions on North Korea on Saturday aimed at pressuring Pyongyang to end its nuclear program. The sanctions could slash North Korea's $3 billion annual export revenue by a third.

The Korean won weakened almost 0.2 percent, with the dollar buying 1,126.9 won.

The Australian dollar strengthened 0.1 percent to $0.794.

In commodities, oil prices edged lower but retained most of Friday's gains as the strong job data bolstered hopes for growing energy demand.

Officials from a joint OPEC and non-OPEC technical committee are set to meet in Abu Dhabi on Monday and Tuesday to discuss ways to boost compliance with their supply reduction agreement.

U.S. crude slipped 0.3 percent to $49.43 a barrel, after rising 1.1 percent on Friday.

Global benchmark Brent also lost 0.3 percent to $52.25, after Friday's 0.8 percent gain.

Gold steadied as the dollar surrendered some of its gains, but remained under pressure. The precious metal was marginally lower at $1,257.27 an ounce, extending Friday's 0.8 percent loss.

Oil eases as rising output weighs, but still near nine-week highs

Oil prices edged down on Monday but still held near nine-week highs, supported by robust U.S. jobs data last week and a slight fall in the U.S. drill rig count, even as rising output from OPEC reined in crude markets.

Global benchmark Brent crude futures were down 17 cents, or 0.32 percent, at $52.25 a barrel at 0540 GMT.

U.S. crude futures were down 15 cents, or 0.30 percent, at $49.43 per barrel.

Prices for both benchmarks have been holding near their highest since late May, when oil producers led by the Organization of the Petroleum Exporting Countries (OPEC) extended a deal to reduce output by 1.8 million barrels per day (bpd) until the end of next March.

"Crude oil prices rose strongly (at the end of last week) as investors viewed (U.S. jobs) data as a positive sign for oil demand in the United States ... A small fall in the number of drill rigs operating in the U.S. also supported prices," ANZ bank said in a note.

U.S. employers added an above-forecast 209,000 workers in July and raised wages, the U.S. Labor Department said on Friday in its monthly jobs report.

U.S. drillers cut one oil rig in the week to Aug. 4, bringing the total count down to 765, energy services firm Baker Hughes also said on Friday.

Despite developments in the United States that have supported prices, global oil markets remain under pressure from high and rising production, analysts said.

"Sector production is up 2 percent YTD (year-to-date) … Volumes should increase by another 200,000 barrels per day over 2H17 if 2017-guidance is to be achieved,” U.S. investment bank Jefferies said in a note to clients on Monday.

Michael McCarthy, chief market strategist at CMC Markets, said supportive news such as big drawdowns in U.S. supplies would be needed to push U.S. WTI prices above $50 a barrel.

"This week, weekly data out of the U.S. should be really influential ... if (U.S. daily production) makes further gains given the high prices, I think that would be a catalyst for downside news," McCarthy said.

Meanwhile, OPEC's crude oil exports in July rose to a record high of 26.11 million bpd, most of which came from Nigeria, according to a report by Thomson Reuters Oil Research last week.

Libya, though, one of the OPEC members who has been exempt from the OPEC-led production cuts, was facing a gradual shutdown of its 270,000-bpd Sharara oilfield after the closure of a control room.

Officials from a joint OPEC and non-OPEC technical committee are set to meet in Abu Dhabi on Monday and on Tuesday to discuss ways to boost compliance with their supply reduction agreement.