July 4, 2017 / 6:08 AM / 20 days ago

FOREX-Yen broadly higher after North Korea fires missile, Aussie falls

4 Min Read

* Dollar/yen slips from 7-week high after Pyongyang's actions

* Yen bounces back sharply vs euro, pound and Aussie as well

* Dollar does better vs euro after US yields rise on upbeat data

* AUD gives back gains and falls, RBA not as hawkish as expected (Updates throughout)

By Shinichi Saoshiro

TOKYO, July 4 (Reuters) - The yen gained broadly on Tuesday after North Korea's missile launch deepened geopolitical concerns, while the Australian dollar slipped after the Reserve Bank of Australia wrongfooted speculators who had bet it would switch to a hawkish stance.

The dollar was down 0.4 percent at 112.910 yen, pulling away from a seven-week high of 113.480 reached the previous day.

The greenback had earlier taken in stride news that North Korea had launched a missile on Tuesday, which Tokyo said appeared to have landed in its Exclusive Economic Zone (EEZ). But it took a dip after Pyongyang later said it would make a major announcement later in the day.

"The yen gained as North Korea's actions came just ahead of the G20 summit scheduled this weekend and cooled risk sentiment," said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

"Dollar/yen is still confined in reasonable range right now. The market will want to see what North Korea's announcement is about before deciding if further gains by the yen are warranted."

The Japanese currency, sought in times of risk aversion, also bounced back from lows marked earlier against other major currencies.

The euro was down 0.6 percent at 128.105 yen after rising to a 16-month high of 128.970 earlier. Sterling fell 0.4 percent to 146.12 yen, nudging away from a seven-week peak of 146.84 yen.

The Australian dollar shed 1.1 percent to 85.92 yen after touching 86.96 yen, its strongest since March 21.

The Australian currency was particularly hard hit on Tuesday.

The Aussie was 0.7 percent lower at $0.7609 following the RBA's monetary policy announcement.

While the RBA's decision to keep interest rates unchanged did not come as a surprise, currency bulls were disappointed as the central bank refrained from taking a hawkish tilt.

Australia's central bank stuck to a neutral stance on the economy and interest rates on Tuesday, a marked divergence from some of its peers abroad who have recently signalled an intent to tighten policy.

The Australian dollar had risen to $0.7685 earlier in the session as some market participants had expected the RBA to join a shift towards a hawkish stance taken by peers like the European Central Bank, Bank of England and the Bank of Canada.

While the dollar slipped against the yen, it stood firm against other rivals.

The dollar index against a basket of six major currencies was steady at 96.254 after rising 0.6 percent overnight as a stronger-than-expected rise in the June Institute of Supply Management (ISM) national factory activity index propelled the 10-year Treasury yield to its highest since May 16.

Monday's developments helped the dollar index bounce back from a 9-month low of 95.470 plumbed on Friday.

The greenback was hit hard last week as expectations increased that central banks in Europe and Canada would eventually shift to tighter monetary policy.

"The dollar's latest rise is driven by direct demand, as opposed to the U.S. currency gaining thanks to the weakness of its peers," said Shin Kadota, a senior strategist at Barclays in Tokyo.

"Expectations towards the Federal Reserve hiking interest rates later this year had perhaps sunk too low. We are now seeing such lowered expectations being reversed a little."

The euro extended overnight losses and was last down 0.2 percent at $1.1343. The common currency has taken a step back from a near 14-month high of $1.1445 scaled on Friday. (Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam and Jacqueline Wong)

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