By Aparajita Saxena
REUTERS - Asian currencies were weaker on Tuesday as investors reduced their positions in emerging markets, unwilling to take risks until tensions over North Korea significantly subside.
There was some suggestion that the risk-off sentiment following North Korea's failed missile launch on Sunday, which raised concerns that the isolated state may soon test another nuclear bomb or missile, was changing.
Safe-haven gold prices, which rose after the launch, fell from five-month highs and the safe-haven yen declined 0.17 percent versus the U.S. dollar.
But the hard-line that President Donald Trump has taken over the North Korea "problem" in the recent weeks, was further underscored by Vice President Mike Pence's warning on Monday that recent American military strikes in Syria and Afghanistan showed that the U.S. leader's resolve should not be questioned.
North Korea remained defiant and said that Pyongyang's next nuclear test would take place "at a time and at a place where our headquarters deems necessary".
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In a note on Tuesday, Mizuho Bank said "Fact is, the North Korea 'problem' is long way off a resolution. Crucially, the potential for more launches ahead of this weekend warrants watching as much as precaution'"
Asian currencies fell as the U.S. dollar pulled away from five-month lows against the yen it hit on Monday.
Dollar upticks in U.S. trading were underpinned by comments from U.S. Treasury Secretary Steven Mnuchin who told the Financial Times he agreed with Trump's view that the dollar's strength in the short term was hurting exports, but strength over the long term was a positive.
The Philippine peso slipped for a second day versus the dollar after February overseas workers remittances rose 3.4 percent from a year earlier. Scotiabank said the market had expected a 5.8 percent gain for remittances, which help power domestic consumption.
The Indonesian rupiah fell to its lowest in nearly a week, ahead of Wednesday's election of the Jakarta governor.
Indonesian markets will be closed on Wednesday for the voting.
THAI BAHT
The baht fell 0.37 percent to 34.378, its lowest in nearly 21 months versus the dollar, on Tuesday.
However, ANZ Research said it expects the baht to resume its uptrend soon, underpinned by a large current account surplus, which is when exports of a country exceed its imports.
The note added that even though the U.S. Treasury's semi-annual report to Congress did not include Thailand on its monitoring list, it does not mean the focus is off its foreign exchange intervention activities.
"Thailand has the 11th largest bilateral trade deficit with the US in 2016. This could result in reduced FX intervention activity by the Bank of Thailand to ensure they remain under the US Treasury's radar," the note said, making the case for further strengthening in the baht.
KOREAN WON
The South Korean won erased modest early morning gains and was 0.27 percent lower against the U.S. dollar.
"Geopolitical concerns will likely increase the volatility in capital flows and the fluctuations in the Korean-won assets," DBS Group said in a note, adding that concerns about North Korea may also weigh on South Korea's tourism industry.
Local political concerns from the coming South Korean presidential election may also affect the won, the note said, adding frontrunner Moon Jae-in is perceived to favour a relatively soft line towards Pyongyang.
(Reporting by Aparajita Saxena in Bengaluru; Editing by Richard Borsuk)