Latest N.Korea test prompts shift to safe havens

Source:Reuters-Global Times Published: 2017/9/4 17:58:39

Yen, bonds, gold gain amid rising instability in Asia while dollar weakens

The Japanese yen, gold and sovereign bonds all rose on Monday as North Korea's latest nuclear test provoked the usual knee-jerk shift to safe havens, though equity losses were modest amid expectations the flare-up would prove fleeting.

The dollar was marked down as deep as 109.22 against the yen at the opening, off a whole yen from late on Friday, but there was no follow-through selling.

The dollar was last marked at 109.84 against the yen.

Japan is the world's largest creditor nation and traders tend to assume Japanese investors will repatriate funds at a time of crisis, thus pushing up the yen. Many wonder, however, if Japanese assets would really remain in favor if an actual war broke out in Asia.

Japan's Nikkei 225 did not take the news well, losing 0.9 percent. MSCI's broadest index of Asia-Pacific shares outside Japan, MSCI AC Asia ex Japan, dipped 0.4 percent while KOSPI, South Korea's main index, was down 0.6 percent.

"Like a bad horror movie, the North Korea saga intersperses moments of calm, with occasional action to jolt you out of your chair," said Rob Carnell, ING Group's head of Asian research.

"But we have been here now many, many times," he added. "Unless this is the precursor to US military action, which we doubt, then in a little over a day or two, tensions will calm again, making this a good buying opportunity for investors with a strong enough nerve."

North Korea on Sunday conducted its sixth and most powerful nuclear test, which it said was of an advanced hydrogen bomb for a long-range missile, prompting the threat of a "massive" military response from the US if it or its allies were to be threatened.

Speaking outside the White House after meeting with President Donald Trump and his national security team, US Defense Secretary Jim Mattis said Trump asked to be briefed on all available military options.

Futures on 10-year US Treasuries climbed five ticks, while yields on Japanese 10-year government debt rallied to their lowest since last November.

Gold hit a 10-month high and was last up 0.6 percent at $1,332.20 per ounce.


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