Asian shares move south on Korea fears
Japanese and South Korean shares fell on Friday, as rising tensions in the Korean peninsula dented confidence in the world economy.
The US dollar was on the back foot against many other currencies after comments from President Donald Trump earlier this week that the US currency was “getting too strong”, and that he would like to see interest rates stay low.
Japan’s Nikkei dropped 0.5 per cent to a four-month low while South Korea’s Kospi lost 0.6 per cent. Shanghai shares were down 0.9 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent, though many markets in the region, including Australia, Singapore and Hong Kong, were closed for Good Friday.
European markets are also shut for the holiday.
“There’s been nothing to cheer about over the last 24 hours. Geopolitical tensions seem to be rising all over the place,” said Masahiro Ayukai, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Investors were spooked by worries North Korea may conduct a nuclear test or conduct other actions that could provoke neighbouring countries as early as this weekend.
News that the United States on Thursday dropped “the mother of all bombs” in Afghanistan, the largest non-nuclear device it has ever unleashed in combat, soured investor moods further.
MSCI’s ACWI, which covers 46 world share markets, dropped to its lowest level since early March.
In currency market, the Korean won fell 1.0 per cent from its previous local close to 1,140.6 to the US dollar.
But the greenback lacked momentum against most other currencies after Trump’s verbal intervention on Wednesday.
The Japanese yen hit a five-month high of 108.73 to the US dollar on Thursday, and stayed close to that level, last trading at 108.93 yen per dollar.
The euro was little moved at $US1.0618, on course to post its first weekly gain in three weeks, though uncertainty over the French presidential election continued to weigh on the currency.
Trump said also on Wednesday that his administration will not label China a currency manipulator in a report due shortly.
Traders are nonetheless looking to the report as his administration has touted a new term “currency misalignment” as a cause of trade imbalances it seeks to address.
“While China will not be named as a manipulator, if countries like Japan, Germany and China remain on its monitoring list and the report steps up criticism, for instance on their monetary policies, then the dollar could fall further,” said Shuji Shirota, head of macroeconomic strategy at HSBC in Tokyo.
The benchmark US Treasury yield skidded to its lowest levels since November on Thursday, with the 10-year yield hitting 2.218 per cent, down more than a half percentage point from a high of 2.629 per cent a month ago.
US stock and bond futures are not traded on Good Friday.
© RAW 2017