Asian shares, USA stock futures, dollar slip on rising Korean tensions

Ivan Schwartz
August 12, 2017

The CBOE Volatility Index, the most widely followed barometer of expected near-term stock market volatility, ended at a session low of 11.11 after rising as high as 12.63. The contract shed 22 cents on Tuesday to close at $49.17.

The yen is often sought in times of geopolitical tension, partly because Japan has a big current account surplus, and it being the world's biggest creditor nation, there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty. Australia's S&P/ASX 200 dropped 1.2 percent, while Japan was closed on a public holiday.

There were falls of almost 2% on South Korea's Kospi and Hong Kong's Hang Seng, with markets in mainland China and Australia also down - taking their cues from sharp losses on Wall Street earlier.

The U.S. central bank left its benchmark rate unchanged in July amid concerns about the slowdown in inflation but expressed optimism that its long-term target of about 2% inflation would be met.

But the yen added to an already-strong weekly rally of close to 1.5 percent, hitting its highest in nearly four months versus the dollar at 108.73 yen.

US stock indexes opened lower on Wednesday as investors turned risk averse.

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The Japanese yen strengthened by 0.5pc to around 109.70 per dollar. The dollar index, which measures its strength against a basket of currencies, was roughly flat at 93.420.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY.

Amid the hot rhetoric, USA stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.

ANALYST'S TAKE: The U.S.jobs figure "was through the roof" and the NFIB survey "painted a much better picture for the U.S. economy than most believed", Stephen Innes of OANDA said in a report. The franc was up 1.1% against the dollar at SF0.9639 and was 1.2% higher vs the euro at SF1.1311. The next key data on focus will be tomorrow's CPI figures which should shed more light on the path of the U.S. inflation.

The price of gold also surged for the second day in a row as the December bullion contract advanced $10.80 U.S.to $1,290.10 U.S.an ounce. When prices of bonds rise, yields fall. Its weekly gain of 2.6 per cent is the largest since June 2016. The Dow is up 48.61 points or 0.2% at 21,892.62, the Nasdaq is up 35.83 points or 0.6% at 6,252.71 and the S&P 500 is up 7.77 points or 0.3% at 2,445.98.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in United States crude inventories, leaving prices volatile.

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