Dollar slumps, Tokyo tanks as North Korea tensions spike

Hong Kong (AFP) – The Nikkei slumped to its lowest close for almost three months Wednesday, leading an Asia-wide sell-off sparked by President Donald Trump’s apocalyptic warning over North Korea’s weapons programme.

Escalating tensions around Pyongyang’s nuclear ambitions sent a shiver through markets worldwide and pushed the dollar to below 109.7 yen in afternoon forex trade to an eight-week low against the safe haven currency, piling more pressure on Japanese stocks.

Tokyo’s blue-chip index tumbled 1.3 percent to its lowest close since late May after the Dow’s winning streak of nine straight records ended following Trump’s sharp rhetoric of “fire and fury”, with the main European bourses also opening lower Wednesday.

Hong Kong and Shanghai followed Tokyo into the red, as China factory gate inflation came in slightly below forecast amid warnings from experts of a further slowdown in the world’s second-largest economy.

Stocks ended more than one percent down in Seoul while the won slumped to a three-week low against the dollar as the US president and South Korea’s volatile neighbour dramatically ramped up their war of words.

Tensions spiked yet further when North Korean state media later said Pyongyang was considering strikes near US military installations in Guam.

But analysts said equities had also fallen as investors took profits.

“North Korea is being used as a reason to sell Japanese stocks, just as it was used yesterday in the US,” said Soichiro Monji from Daiwa SB Investments in Tokyo.

“Japanese equities hadn’t been rising much despite positive earnings results, so investors had started jumping at shadows, doubting whether they should really be holdings onto Japanese stocks.”

US equities had been on track for a 10th-straight record session Tuesday and the dollar was initially up after the JOLTS survey showed job openings hit a record in the US last month.

– Positive US jobs data –

Greg McKenna, an analyst at AxiTrader, said the data could bolster the Federal Reserve’s plan to start winding in its multi-trillion-dollar bond holdings balance sheet, expected to be announced next month.

“This is Janet Yellen’s favoured labour market indicator and could reinforce Yellen and her colleagues about the path they have set for policy normalisation,” he said.

The positive data also bolstered the greenback against the euro and the pound Wednesday.

Sydney was a rare bright spot in Asia-Pacific with stocks closing 0.4 percent up as Australia’s biggest bank posted record…

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