September 22, 2017 / 4:03 PM / a year ago

FOREX-North Korea jitters, profit-taking knock dollar vs yen

* Dollar on pace to snap 5-day winning streak vs yen

* Sterling weak, slips on British PM’s Brexit speech

* Graphic: World FX rates in 2017 (Adds U.S. market open; changes dateline; previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Sept 22 (Reuters) - The dollar slipped against the yen on Friday, with tensions simmering on the Korean peninsula and as the boost from heightened expectations of a U.S. interest rate hike in December faded.

The dollar was down 0.39 percent at 112.02 yen, on pace to snap a five-day winning streak.

North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after U.S. President Donald Trump threatened to destroy the reclusive country, with leader Kim Jong Un promising to make a “mentally deranged” Trump pay dearly for his comments.

“Increasing tensions with North Korea is putting a little bit of selling pressure on the dollar, especially against the Japanese yen,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The yen tends to benefit during times of crisis due to Japan’s net creditor nation status, and the expectation that Japanese investors would repatriate assets.

“Keep in mind the yen is bouncing off of about a two-month low,” Esiner said.

“The market is probably as much taking profits on the dollar’s move earlier in the week as it is reacting to anything related to North Korea.”

The dollar scaled a two-month peak of 112.71 yen on Thursday after the Bank of Japan maintained its bond-buying pledge. The move also was spurred by the Federal Reserve’s policy statement on Wednesday in which it signalled it still intended to raise rates in December.

The dollar index, which tracks the greenback against six major currencies, was down 0.25 percent to 92.03.

Sterling slipped to a session low against the dollar before recovering a little after British Prime Minister Theresa May set out her plan for future ties with the European Union in a speech.

May called for Britain to stay in the EU’s single market during a roughly two-year transition out of the bloc, while offering concessions on a divorce deal as she appealed for a revival of Brexit negotiations.

Sterling was down 0.45 percent against the greenback at $1.3517, after falling as low as 1.349

“Theresa May’s speech was, as expected, a bit opaque, thin of detail and offered no new fundamental direction,” Neil Wilson, senior market analyst at ETX Capital in London, wrote in a note

The euro inched up 0.23 percent to $1.1966, with traders not seeing Sunday’s German elections as a source of risk. Chancellor Angela Merkel is widely expected to win a fourth term in power. (Reporting by Saqib Iqbal Ahmed; Editing by Paul Simao)

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