U.S. spy satellites have picked up new activity at North Korea's underground nuclear test site, CNN reported on Tuesday.
"A rocket engine was tested today", the US official said on condition of anonymity, without providing any details.
"If a North Korean delegation takes part in the Pyeongchang Winter Olympics, I believe it will greatly contribute to realizing the Olympic values of friendship and peace", he said, according to a script of his remarks released by the presidential Blue House.
South Korean President Moon Jae-in on Friday observed the test-firing of a new midrange missile being developed to counter North Korean threats, saying Seoul must be able to militarily "dominate" the North for future engagement to work.
South Korea began developing Hyunmoo-2 after a 2012 agreement with its ally, the United States, to increase the range of its weapons to 800 kilometers (500 miles) and raise the warhead limit to 500 kilograms (1,100 pounds).
Defiant North Korea has conducted another rocket engine test that can be used for an intercontinental ballistic missile or ICBM capable enough of reaching the United States mainland.
South Korean officials did not have details about the reported test and declined to comment on the possible nature of the engine.
Moon's observation of the test launch was likely meant to underscore South Korea's capability to respond to a North Korean missile attack, mitigating security concerns prompted by the controversy about delaying the THAAD deployment while also sending a warming message to the North Korean leadership, which continues to develop nuclear weapons and missiles.
South Korea's military plans to deploy the Hyunmoo-2 missile after conducting two more test firings.
Moon's visit to the missile test site came a day after he said in an interview with Reuters that stronger global sanctions should be imposed on North Korea if it tests another nuclear weapon or intercontinental ballistic missile (ICBM) test.
However, the Chinese Foreign Ministry spokesman questioned such calls.
They also said that military options for North Korea have recently been updated, and will be presented to President Donald Trump for a decision to act if there is a nuclear test.
China's top diplomat, Yang Jiechi, told President Donald Trump in a meeting at the White House that Beijing was willing to "maintain communication and coordination" with the USA in an effort to defuse tension on the Korean peninsula, according to a statement from China's Foreign Ministry on Friday.
The continental U.S. is around 9,000km from North Korea.
If fired from the southernmost Jeju Island, a Hyunmoo-2C missile still could hit a target in the northwestern North Korean city of Sinuiju, which borders China. It has conducted five nuclear tests since 2006 and fired numerous ballistic missiles.