US dollar off highs as China, South Korea plead peace; had hit 6-week high vs yen on news of shelling

The US dollar jumped against its major counterparts in Asian trade on Tuesday, hitting a 1-1/2-month high against the yen, after North Korea shelled a South Korean island, leading worries that the lingering tensions between the countries could worsen. The North Korean move triggered a flight from risky assets into the greenback, which is widely considered a safer bet.

Continued political uncertainty in Europe and lackluster trading ahead of a U.S. holiday helped intensify the volatility in the currency market.

However, peace appeals by South Korea and China prompted investors to soften their stance and the dollar pared some of the quick gains it earned on the news. Analysts do not see the tensions to worsen and lead to a war.

At 0846 GMT, the dollar was at 1.3553 against the euro, moving off 1.3525, but 0.53 percent stronger than its previous close of 1.3625. The Greenback jumped to 83.83 against the yen on the news, its highest since October 5, before retreating to 83.66 still 0.42 percent higher from its Monday's close.

The dollar was at 1.5924 versus the pound, 0.45 percent higher on the day and moving off an intra-day high of 1.5882.

Against the Australian dollar, one of the most preferred unit for risk-lovers, the US currency rose more than 1 percent on the Korean news. The AUD/USD was at 0.9786, at which the greenback is 1.01 percent stronger on the day. The US unit had strengthened to 0.9773 immediately after the news.