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As North Korea-US tensions brew, safe-haven currencies rise

13 August 2017

In more back-and-forth between President Trump and North Korea, Pyongyang General Kim Rak Gyom, leader of the country's strategic forces, said that "sound dialogue is not possible with such a guy bereft of reason and only absolute force can work on [Trump]".

South Korea's Kospi sank 1.7 per cent to 2,319.83 and Hong Kong's Hang Seng shed 1.8 per cent to 26,946.81. July's 0.1 percent increase in consumer prices suggests that the Federal Reserve may be less likely to raise interest rates next month.

In Japan, core machinery orders dropped 1.9% on month in June, well below the 3.7% gain seen and fell at 5.2% pace annually compared to a 1.0% drop seen.

NAB lost 1% despite the bank reporting a 5% rise in its third-quarter cash profit. While machinery orders are regarded to be a volatile metric, they could influence market sentiment. The dollar index, which measures its strength against a basket of currencies, gained 0.1 percent to 93.490. Brent crude, used to price worldwide oils, declined 29 cents to $51.61 per barrel in London.

Stock markets took the brunt of risk-averse trading on Wednesday after an overnight escalation of tensions between the U.S. and North Korea forced investors into haven assets such as gold, Treasuries and the Swiss franc.

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Markets had earlier stabilised as US Secretary of State Rex Tillerson had tried to ease the tensions, saying he did not believe there is "any imminent threat" to Guam and that diplomacy would prevail.

"Although risk aversion was felt in Europe, the toning down of language saw a recovery in the US (session)", National Australia Bank economist Tapas Strickland said in a Thursday note.

"(Safe-haven demand) has settled down to a certain extent, but the market is still expecting more news to come", said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.

As reported at 10:58 am (JST) in Tokyo, the USD/CHF was trading at 0.96 Swiss Francs, a gain of 0.17%.

The Japanese yen hit an eight-week high against the USA dollar, and US -traded Nikkei stock futures dropped 2 percent to their lowest since mid May.

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Investors opted for the perceived safety of US Treasuries, which pushed the yield on the 10-year note three basis points lower to 2.21 percent.

The S&P is trading near its most expensive valuation level since 2004, as measured by the price-to-12-month forward earnings ratio.

The US currency did find some relief as US yields recovered ground and the gold retreated from its best levels.

Toyota shares tumbled 1.57 percent to 6,236 yen and Nintendo was off 1.83 percent to end the session at 37,490 yen.

In the United Kingdom, gold mining stocks Randgold Resource and Fresnillo were among the few to gain - up 2.8% and 4.9%.

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A separate report from the Labor Department showed an unexpected uptick in initial jobless claims in the week ended August 5th.

As North Korea-US tensions brew, safe-haven currencies rise