CURRENCIES: Dollar Slides Vs. Swiss Franc As U.S.-North Korea Discord Prompts Run To Safety
North Korea's Kim Jong Un made explicit threat to strike a U.S. military base in Guam
The dollar fell sharply against the Swiss franc on Wednesday, with haven assets including Switzerland's currency bid higher following a verbal clash between North Korea and U.S. President Donald Trump.
Flight-to-safety moves pushed up the value of classic assets perceived as safe, including the franc, the Japanese yen and gold prices after North Korean leader Kim Jong Un made an explicit threat to strike a U.S. military base in Guam (http://www.marketwatch.com/story/north-korea-threatens-missile-strike-on-us-base-on-guam-2017-08-08).
His order, reported in state media, came hours after U.S. President Donald Trump warned Pyongyang not to "make any more threats" to the U.S., saying it would face a "fire and fury" response (http://www.marketwatch.com/story/trump-today-president-says-north-korea-faces-fire-and-fury-if-it-doesnt-halt-threats-2017-08-08) "like the world has never seen." Trump's comments came after a Washington Post report (https://www.washingtonpost.com/world/national-security/north-korea-now-making-missile-ready-nuclear-weapons-us-analysts-say/2017/08/08/e14b882a-7b6b-11e7-9d08-b79f191668ed_story.html?utm_term=.0938becb046e) that North Korea has built a miniaturized nuclear warhead.
The Swiss franc bought $1.0382 on Wednesday, representing a 1.2% rise from $1.0266 late Tuesday in New York. Meanwhile, the dollar fetched Yen109.69, compared with Yen110.31 late Tuesday.
"The unpredictable nature of North Korea means it is hard to gauge exactly how likely an attack is, yet given the military power of both nations, there is no surprise we are seeing markets shift out of risk assets and into havens such as the yen and gold," said IG market analyst Joshua Mahony, in a note.
The South Korean won slipped 0.8% against the greenback, with one dollar buying 1,139.71 won on Wednesday morning. Meanwhile, the country's KOSPI Composite Index fell 1.1% to 2,368.39.
Gold futures prices were up nearly 1% (http://www.marketwatch.com/story/gold-gains-about-1-as-us-north-korea-tensions-grow-2017-08-09) to $1,273.80 per ounce. Meanwhile, European stocks were sliding, with French and German benchmarks losing 1.6% and 1.3% respectively. Korea's Kospi stock benchmark lost 1.1% while U.S. stock futures were losing ground ahead of Wednesday's open (http://www.marketwatch.com/story/us-stock-futures-pull-back-on-rising-north-korea-tensions-2017-08-09).
"With European, U.S. and Asian markets all suffering heavily in anticipation of a potential conflict in Asia, it is worthwhile noting that we have heard similar posturing between Trump and Kim Jong Un before," said Mahony.
"There is a big difference between words and actions. Kim Jong Un knows that by starting a conflict he is by and large marking the beginning of the end for his regime. Meanwhile, Trump knows that a conflict in North Korea could risk a huge amount of casualties and a huge humanitarian crisis on China's doorstep."
The British pound bought $1.2989, slightly off from $1.2993 late Tuesday in New York after initially registering some gains this morning. The euro fetched $1.1736 compared with $1.1752 late Wednesday in New York.
On the economic data front, preliminary US labor productivity for the second quarter beat expectations and rose 0.9%, compared with the consensus expectation of a 0.6% gain. Unit labor costs for the same period increased by 0.6% compared to the expected 0.85%.
The ICE dollar index stood at 93.7580, 0.1%, higher in early New York trade.
(END) Dow Jones Newswires
August 09, 2017 09:44 ET (13:44 GMT)