NEW YORK - The U.S. dollar dropped to a two-week low on Tuesday as traders bet on riskier currencies on news North and South Korea would hold their first summit in more than a decade and after the South said the North was willing to discuss denuclearization with the United States.
The impact on stock markets of the news from the Korean Peninsula was clouded by concern over a possible trade war triggered by tariffs proposed by President Donald Trump last week on imports of steel and aluminium.
North and South Korea, still technically at war but with tensions having eased since the Winter Olympics hosted by the South last month, will hold their first summit in more than a decade next month, South Korea said on Tuesday. It added that the North would suspend nuclear tests while proposed talks with the United States on denuclearization were underway.
Reduced safe-haven holdings of the greenback and a renewed appetite for the Australian dollar, New Zealand dollar and emerging market currencies were limited by worries about a trade war stemming from Trump's proposed tariffs.
"It's too early to wholeheartedly buy these currencies because of the chances of escalating trade tension between U.S. and its trading partners," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The dollar index, tracking it against a basket of major currencies, fell 0.5 percent, with the euro up 0.53 percent at $1.24. The dollar index touched its lowest since Feb. 20.
The Japanese yen strengthened 0.12 percent versus the greenback to 106.07 per dollar, while sterling was at $1.3873, up 0.18 percent on the day.
News on the Koreas summit also helped reduce demand for safe-haven U.S. bonds, which were trading in a tighter range after benchmark yields rose Friday and Monday.
Benchmark 10-year notes last rose 3/32 in price to yield 2.868 percent, from 2.879 percent late on Monday.
The 30-year bond last rose 11/32 in price to yield 3.1325 percent, from 3.151 percent late on Monday.
Hedging needs as CVS Health Corp announced a nine-part corporate bond sale were also seen as weighing on bonds.
Stocks fell in the United States and edged higher in Europe, but a global gauge of major equity markets was up, boosted by gains in Asia after stocks were battered Monday on concerns over a global trade war. Those worries eased during U.S. market hours on Monday, so Asian equities were catching up.
The Dow Jones Industrial Average fell 105.77 points, or 0.43 percent, to 24,768.99, the S&P 500 lost 0.91 points, or 0.03 percent, to 2,720.03 and the Nasdaq Composite added 21.73 points, or 0.3 percent, to 7,352.43.
The pan-European FTSEurofirst 300 index rose 0.17 percent and MSCI's gauge of stocks across the globe gained 0.51 percent.
Emerging market stocks rose 1.78 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.84 percent higher, while Japan's Nikkei rose 1.79 percent.
U.S. crude fell 0.38 percent to $62.33 per barrel and Brent was last at $65.55, up 0.02 percent.
Spot gold added 1.2 percent to $1,335.26 an ounce. U.S. gold futures gained 1.27 percent to $1,336.70 an ounce.
Copper rose 1.27 percent to $6,998.00 a tonne.