Dollar, global shares up in Asia on relief at North Korea inaction


Sep 11, 2017
Rio De Jenario
The U.S. dollar won a reprieve from risk aversion on Monday after North Korean dictator Kim Jong Un decided to hold a party over the weekend rather than launch another missile, tempering safe havens such as the yen and Treasuries.
Investors remained cautious over the possible economic impact of Hurricane Irma as it chewed its way up the Florida coast, knocking out electricity to 3 million homes and businesses statewide.
Japan’s Nikkei (N225) rose 1.4 percent after Pyongyang held a massive celebration to congratulate the nuclear scientists and technicians who steered the country’s sixth and largest nuclear test a week earlier.
The United States and its allies had been bracing for another long-range missile launch to mark for the 69th anniversary of North Korea’s founding on Saturday.
The sense of relief was enough to lift E-Mini futures for the S&P 500 (ESc1) by 0.5 percent, while yields on 10-year Treasury notes rose 3 basis points to 2.09 percent (US10YT=RR).
South Korea’s main index (KS11) added 0.8 percent, while MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) gained 0.4 percent.
“It’s too early to say the risks are gone, but one thing for sure is that market players now think the situation won’t get worse as it did some weeks ago,” said Lee Kyung-min, a stock analyst at Daishin Securities in Seoul.
Lee added that many foreign investors and domestic institutions are purchasing South Korean tech and chemicals shares as quarterly earning season nears.
The U.S. dollar hovered at 108.42 yen , up from Friday’s 10-month trough of 107.32. Against a basket of currencies, the dollar added 0.15 percent to 91.490 (DXY) but that was still uncomfortably close to last week’s 2-1/2 year low of 91.011.
The euro eased to $1.2017 , having hit a top of $1.2092 on Friday amid speculation the European Central Bank was closer to starting a wind-back of its stimulus program.
ECB officials last week generally agreed their next move would be to cut their bond purchases and discussed a range of options, Reuters reported.
China’s central bank was also a focus in Asia after sources said it plans to scrap reserve requirements for financial institutions settling foreign exchange forward yuan positions with effect from Monday.
“The removal potentially makes it easier for traders to purchase the USD, easing the pressure for yuan appreciation,” said analysts at ANZ in a note.
“The change likely signals some discomfort about the stronger yuan and its impact on Chinese exports.”
The dollar was last up 0.16 percent against the offshore yuan at 6.5128 yuan , off a low of 6.4437.
There were also reports Beijing was planning to shut down local crypto-currency exchanges, dealing a blow to bitcoin’s recent stellar rally.
Bitcoin was quoted at $4,300 (BTC=BTSP) on the BitStamp platform, off the recent record high of nearly $5,000.
In commodity markets, gold softened 0.7 percent to $1,337.81 an ounce and away from a one-year peak of $1,357.54.
Oil prices regained a little ground after the Saudi oil minister discussed the possible extension of a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts.
The news of the talks on Sunday helped offset the downward pressure on oil prices amid worries that energy demand would be hit hard by Hurricane Irma. [O/R]
U.S. crude was trading 36 cents firmer at $47.84 a barrel, while Brent rose 22 cents to $56.00.