North Korea tensions send dollar to eight-week low vs. yen

Xavier Trudeau
Août 12, 2017

The CBOE Volatility Index, the most widely followed barometer of expected near-term stock market volatility, rose to a near three-month high of 15.36.

The S&P 500 index had its biggest one-day drop in nearly three months on Thursday as investors fled riskier assets, with technology stocks leading the charge, in response to an increasingly aggressive exchange of threats between the United States and North Korea. After paring gains it was still on track for its biggest one-day percentage gain since May 17.

The local currency closed at 1,143.50 won against the USA dollar, down 1.50 won from the previous session's close.

The index was showing signs of Greed just two days ago while the Dow was in the midst of a winning streak that included nine straight record highs.

Trump ratcheted up his rhetoric against North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or US allies after it disclosed plans to fire missiles over Japan to land near the US Pacific territory.

Investors' unease over escalating tensions between the United States and North Korea had weighed on stocks earlier in the day, pushing gold and bond prices slightly higher. Eastern time. The Dow Jones industrial average slid 120 points, or 0.5 percent, to 21,928.

The pan-European FTSEurofirst 300 index lost 1.01 per cent and MSCI's gauge ofstocks across the globe shed 0.26 per cent for a weekly loss of 1.6 per cent, the largest since the week to November 4.

Netflix traded 2.4 percent weaker as of 3.09pm.

The dollar was down 0.53 percent against the yen at 109.48 yen, after briefly dropping as low as 109.53.

"The yen is the big story really".

"It's surprising that given Japan's proximity to North Korea the yen is seeing any benefit from risk aversion", said Lennon Sweeting, chief market strategist for XE.com, in Toronto.

In Europe, the pan-continental STOXX 600 index fell 0.9 percent, with falls deepening after a vehicle rammed a group of soldiers in Paris, injuring six, in what officials said was a suspected terrorist attack.

Data showed USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year, while another set showed the number of Americans filing for unemployment benefits unexpectedly rose last week. "If we were threatened, the USA would take action and there'd be a Treasury rally", said Battle. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.5 basis points at 2.228%.

Crude oil prices tumbled on the back of the selloff on Wall Street and lingering concerns over global oversupply.

Gold added $16.70, or 1.3 percent, to settle at $1,279.30 an ounce.

Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, said: "While the tough talk about the potential for war (between the USA and North Korea) is scary, investors have heard it many times before".

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