Yen rallies, stocks down as N Korea fires missile over Japan
AFP
AFP, HONG KONG: The yen rallied yesterday and Asian equity markets sank after North Korea fired a ballistic missile over Japan, ratcheting up geopolitical tensions in the region.
The rocket test is the latest in a series of recent provocations by Pyongyang, testing US President Donald Trump, his South Korean counterpart Moon Jae-In and Japanese Prime Minister Shinzo Abe and raising fresh fears of conflict with the nuclear-armed nation.
Regional investors ran for cover soon after opening, seeking out safe bets. The yen surged to four-month highs of 108.70 against the dollar from 109.26 in New York before easing slightly later in the day.
Gold climbed 1.8 per cent to near 10-month highs of $1,321.
The greenback had already been suffering selling pressure as expectations for another Federal Reserve interest rate rise faded in recent weeks. The euro pushed above the $1.20 mark for the first time since January 2015 as traders bet on the European Central Bank soon winding in its crisis-era stimulus measures.
Greg McKenna, chief market strategist at CFD and FX provider AxiTrader in Sydney, said: Whats important about the North Korean action is that it ratchets up the pressure on President Trump and Japan to respond. And that may put them squarely in a face-off with China should they respond militarily.
Stocks were in the red although initial sharp losses were pared, with Tokyo losing 0.5 per cent to sit around four-month lows. Seoul ended 0.2 per cent down, having lost more than one per cent earlier. Hong Kong was 0.2 per cent lower in the afternoon following five straight gains.
Sydney shed 0.7 per cent while there were also losses in Taipei, Manila and Wellington, though Shanghai ended up 0.1 per cent.
In early European trade London fell 0.7 per cent, Paris shed 0.9 per cent and Frankfurt was off 0.8 per cent.
The reaction has been classic risk aversion, said Sean Callow, a senior currency strategist at Westpac Banking in Sydney, but added that the market response is likely to be limited by the recent history of FX and equities settling down after each provocation from Pyongyang.
Japans Abe said the outrageous act of firing a missile over our country is an unprecedented, serious and grave threat and greatly damages regional peace and security.
Pyongyang last month carried out two ICBM tests that appeared to bring much of the US mainland within reach for the first time and heightened strains in the region.
At the time Trump warned North Korean leader Kim Jong-Un of raining fire and fury on the country, saying Washingtons weapons were locked and loaded, while Pyongyang threatened to fire a salvo of missiles over Japan towards the US territory of Guam.
Hitoshi Asaoka, strategist with Asset Management One, said the missile launch could reignite concern over a possible military clash between the US and North Korea.
The market cant help it but see risk aversion strengthen. We have to look out for how the US will perceive the latest missile launch, he told Bloomberg News.
On oil markets the key US contract West Texas Intermediate staged a small recovery, after suffering a 2.7 per cent sell-off
Monday on the back of concerns that killer Hurricane Harvey, which slammed Texas at the weekend, would batter demand for the commodity.
Going forward, given that a significant portion of refining capacity in the US Gulf Coast is shut, we are likely to witness a situation of high domestic crude stockpiles which will put pressure on prices, Amit Musaddy of energy consultancy Trifecta told the news agency.
