Yen rallies, stocks down as NKorea fires missile


HONG KONG: The yen rallied on Tuesday and Asian equity markets sank after North Korea fired a ballistic missile over Japan, ratcheting up geopolitical tensions in the region.

The missile 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 the 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 1.9 percent to near 10-month highs of $1,322.

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: “What’s 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 percent to sit around four-month lows. Seoul ended 0.2 percent down, having lost more than one percent earlier. Hong Kong was 0.4 percent lower following five straight days of gains.

Sydney shed 0.7 percent while there were also losses in Taipei, Manila and Wellington, though Shanghai ended up 0.1 percent.

In early European trade London fell 0.7 percent, Paris shed 0.9 percent and Frankfurt was off 0.8 percent.

“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”.

‘Possible military clash’

Japan’s 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. AFp


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