Published: Fri, August 11, 2017
Medicine | By Megan Pierce

Yen firms after N.Korea says considering plan to strike Guam

Yen firms after N.Korea says considering plan to strike Guam

The Swiss franc and the yen had notched up impressive gains against the dollar on Wednesday after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.

Wider Asian markets down: Japan's Nikkei stock index closed down 1.33%, the Hong Kong Hang Seng index is down 0.35%, and China's Shanghai Composite is down 0.28%. South Korea's KOSPI dropped as much as 1.2 percent to a two-month low to move further away from record highs set at the end of July.

"At the moment, it is unclear how the Korean situation will play out and that is hampering the markets. So the impact is likely to fade eventually".

The dollar carried over its weakness from overnight trading overseas, where dollar selling gathered steam following a news report citing US intelligence officials as saying that North Korea has succeeded in making a nuclear warhead that is small enough to be mounted on its missiles.

The yield on the benchmark 10-year U.S. Treasury note fell to 2.253 percent from its U.S. close of 2.282 percent on Tuesday.

"U.S. equities managed to cut its losses towards yesterday's close and while the VIX (volatility index) did pop higher, it still remains at an overall low level".

"These developments suggest that risk aversion caused by geopolitical tensions in North Asia are temporary in nature, as long as it does not involve military conflict".

The yen is often sought in times of geopolitical tension, partly because Japan has a big current account surplus, and it being the world's biggest creditor nation, there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.

Stocks ended more than one per cent down in Seoul while the won slumped to a three-week low against the dollar as the United States president and South Korea's volatile neighbour dramatically ramped up their war of words. The Korean won is also suffering - the USA dollar is up 0.58% against the currency at the time of writing (7.30 a.m. GMT/1.30 a.m. ET), while the pound is up 0.77% against the won, and the euro is up 0.53% against it. Investors will study the numbers to get a feel for the US inflation trend and any impact the data could have on the Federal Reserve's monetary policy. Elsewhere, the retreat by the New Zealand dollar continued, with the kiwi hovering near a three-week low of $0.7319.

In commodities, crude oil lost momentum after rising overnight on data pointing to declining USA inventories.

The US Energy Information Administration raised its 2017 and 2018 US crude output estimates to 9.9 million and 9.33 million barrels a day respectively, Weston said, but "on the other hand, we are hearing the UAE, Kazakhstan and Iraq will fully comply with the OPEC agreement" to cut oversupply.

Gold and silver rise: The price of gold is up 0.30% to $1,265.28.

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