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Singapore. — Asian stocks were mixed yesterday and the dollar gave up its gains, as escalating tensions over North Korea outweighed support from US Treasury Secretary Steve Mnuchin in support of a stronger US currency.

Financial spreadbetters predict a mixed start for European stocks, with Britain’s FTSE 100 set to open 0,2 percent lower, and Germany’s DAX and France’s CAC 40 to start the day up 0,2 percent and 0,3 percent respectively.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0,5 percent. Japan’s Nikkei added 0,4 percent, shrinking earlier gains.

South Korea’s KOSPI advanced 0,2 percent. US Vice-President Mike Pence told business leaders in Seoul that the US would review and reform the five-year-old free trade agreement between the two countries, in part because South Korea imposed too many barriers on US business.

The US and South Korea pledged at the close of Pence’s visit to forge a stronger alliance. They agreed to co-operate with China to rein in North Korea, which has vowed to conduct more tests following Sunday’s failed missile launch.

Pence warned North Korea on Monday that recent US military strikes in Syria and Afghanistan showed President Donald Trump’s resolve should not be questioned.

Pence and South Korea’s acting president, Hwang Kyo-ahn, said they would proceed with the early deployment to South Korea of the US THAAD missile-defence system, in spite of China’s objections.

The Korean won weakened about 0,8 percent, with the dollar at 1,141.40 won.

“It seems the focus is now firmly on future missile tests from North Korea and whether any future tests will actually be successful,” Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

“One suspects the concerns in North Korea have further to play out.”

Despite the tension, Wall Street posted its first session of gains in four on Monday as investors turned their attention to first-quarter corporate earnings. All three major indices advanced about 0,9 percent overnight.

US housing starts and building permits for March, as well as industrial production, are due later on Tuesday. The dollar was weighed down by concern about North Korea, Mnuchin’s comments that Trump’s promised tax reform will be delayed, and the first round of talks between Japan’s leaders and Pence on Tuesday.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, was little changed at 100.34, after rising earlier. The dollar inched up 0,1 percent to ¥109,05. It hit its lowest level since November 15 on Monday, before closing higher on Mnuchin’s remark that a strong currency would be positive over the long term, while agreeing with Trump that it hurts exports in the short term.

Pence’s visit to Japan, the next stop on his Asia trip, is key for the currency. His talks with Prime Minister Shinzo Abe are expected to focus on security issues, while his meeting Deputy Prime Minister Taro Aso will deal with economics.

“For dollar/yen, the main focus will be on what kind of pressure the US could apply on Japan as basically US trade policy is linked with a policy for a weaker dollar,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

“The yen cannot simply continue weakening along with higher stocks under such conditions,” he said. — Reuters.