Markets

Focus on North Korea, yen, gold, Fed, BOE

Most indexes in Asia were moderately lower on Friday after North Korea launched a missile in the direction of the east.

The unidentified missile flew over Japan before landing 2,000 km east of Hokkaido, Reuters said, citing Japanese broadcaster NHK. Following the North’s latest launch, South Korea has responded by firing its own missile into the sea, according to Reuters.

The hermit state had warned through a state agency on Thursday that it would “sink” Japan, Reuters reported. North Korea had fired another ballistic missile which passed over northern Japan before falling into the sea on Aug. 29 local time.

However, the knee-jerk reaction to buy safe-haven currencies on the news unwound fairly quickly. By 9:27 a.m. HK/SIN, the dollar recouped most losses against the safe-haven yen, trading at 110.18 yen after falling as low as 109.54 on the news. The greenback had fetched around 110.28 yen before the news.

The Swiss franc, another safe-haven currency, pared earlier gains to trade at 0.9633 francs to the dollar after strengthening as high as 0.9610.

Gold prices climbed as high as $1,334.36 an ounce before paring gains to trade at $1,331.81 by 9:30 a.m. HK/SIN. Still, that remained a touch above the $1,329 seen before the news. The yellow metal is often regarded as a safe haven in times of geopolitical uncertainty.

While trade was slightly cautious, the muted reaction from investors was attributed by market watchers to a sense of fatigue.

“It would be wrong to say that markets are not taking any notice, but the relatively muted responses of yen, won and risk assets globally suggests that a sense of fatigue on this belligerence is creeping in” Rob Carnell, Asia head of research at ING, said in a note.

IG strategist Jingyi Pan said the subdued reaction was likely because investors no longer saw the event as an unprecedented threat, given how North Korea had done the same at the end of August.

In equities, South Korea’s benchmark Kospi index, came under some pressure. The index lost 0.36 percent. Defense names like Korea Aerospace and Victek rose 0.53 percent and 3.24 percent, respectively, while blue chips like Samsung Electronics and Hyundai Motor edged lower.

Down Under, the S&P/ASX 200 shed 0.62 percent with the 1.7 percent fall in the materials sub-index weighing on the broader index. The heavily-weighted financials sub-index edged down 0.53 percent.

Japan’s Nikkei 225, however, shrugged off elevated geopolitical tensions in the region to advance 0.15 percent.

Greater China markets edged down in early trade. Hong Kong’s Hang Seng Index fell 0.7 percent while mainland markets made more moderate losses. The Shanghai Composite lost 0.36 percent and the Shenzhen Composite was off by 0.026 percent.

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