Markets

Global safe-haven trades jump on escalating North Korea tensions

Global safe-haven trades jump on escalating North Korea tensions

"Obviously we are looking at the increased tensions between the U.S. and North Korea", said Brad Bechtel, managing director FX at Jefferies in NY.

The greenback slipped 0.83 percent to a near two-week low against the Swiss franc and fell to 110.11 yen, its lowest in almost two months against the Japanese currency.

The most traditional safe havens at times of mounting geopolitical unrest are the Swiss franc and gold, and both were big movers on Wednesday.

That prompted North Korea to say it was considering firing missiles at Guam, a U.S. Pacific island territory.

ANALYST TAKE: "We're seeing significant risk aversion in the markets on Wednesday, with the escalation in tensions between the USA and North Korea triggering moves into safe haven assets", said Craig Erlam, senior market analyst at OANDA.

Nervous trading marked the 10th anniversary of the start of the financial crisis on Wednesday, after Donald Trump's warning that North Korea faced "fire and fury like the world has never seen" if it continued to make threats against the US. "Tensions are still high and not going away at the moment".

But while most traders appeared to favour safe-haven assets, bargain seekers helped Wall Street's three major indexes pare the day's earlier losses.

Reed Questions Trump's North Korea Saber-Rattling
Hours later, the rogue state retaliated - saying it was "carefully examining" a plan to strike the US Pacific territory of Guam. Trump's tweet that America's nuclear arsenal is "now stronger and more powerful than ever before" is debatable.

"Geopolitical tensions are the key driving force this morning, boosting demand for safe havens", TD Securities analysts said in a note.

South Korea's won currency dropped 0.9 percent against the dollar to its lowest close since July 13. It has weakened 1.5 percent since hitting a 2-1/2 year high of 1.1910 on August 2.

Against the dollar, the franc surged 0.6 percent to 0.9688 francs, reversing a two-week losing streak.

The dollar index fell 0.14 per cent, with the euro unchanged at US$1.1757.

Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.

The Japanese yen strengthened by 0.5 percent to around 109.70 per dollar.

Switzerland's franc on Wednesday posted its biggest single-day rise against the euro since the central bank removed its cap on the currency in January 2015. Ten-year US yields dropped 4.3 basis points to 2.24 percent and German equivalents fell 3 bps to 0.43 percent, a six-week low. Silver rose 1.7% to $16.70 per ounce. United States crude rose 1.08 per cent to US$49.70 per barrel and Brent was last at US$52.78, up 1.23 per cent on the day.


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