Business

Gold hovers near two-month highs on North Korea tensions

Gold hovers near two-month highs on North Korea tensions

The dollar slipped 0.4 percent against its perceived safe-haven Japanese counterpart to 109.84 yen, its lowest since mid-June.

The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.37 percent at 93.052 after touching 92.934, the lowest in a week.

Shanghai's main index also tumbled 1.6 percent to 3,208.54 while Australia's S&P/ASX 200 dropped 1.2 percent to 5,693.10.

US stocks closed lower on Tuesday after Trump's vow to respond aggressively to any North Korean threats triggered a late afternoon selling spree.

In the latest economic data, the consumer-price index (http://www.marketwatch.com/story/us-consumer-inflation-remains-soft-in-july-cpi-shows-2017-08-11) rose a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve's 2% annual rate target.

Trump ratcheted up his rhetoric against North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory. "Risk aversion is still very much a concern for markets", said Shaun Osborne, chief currency strategist at Scotiabank in Toronto. With the sell-off on the day, the Nasdaq and the S&P 500 fell to their lowest closing levels in a month.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea proved to be the trigger.

Chinese bluechips lost 1.6 per cent, while Hong Kong's Hang Seng was 1.9 per cent lower. -North Korea tensions and the weak data that further reduced expectations of a Fed rate hike in December.

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Although Japan could be in the front line of any clash with North Korea, the yen is benefitting because Japan is the world's biggest creditor nation and Japanese investors tend to repatriate funds in times of stress, attracting other flows.

Disappointing US inflation and jobs data have not helped the dollar.

"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. India's Sensex shed 0.2 percent to 31,951.28 and benchmarks in Taiwan, New Zealand and Thailand also declined.

And in bond markets, 10-year US Treasuries and Germany's ultra-safe government bonds, known as Bunds, were trading at their highest prices since June.

The 30-year bond US30YT=RR last rose 28/32 in price to yield 2.7759 percent, from 2.818 percent late on Wednesday.

Oil futures prices fell Thursday on a report from the Organization of the Petroleum Exporting Countries that said crude production among the group's members rose in July.

The market's backstop safety asset, gold, edged up to its latest two-month high of $1,288 an ounce.

Meanwhile, the Russell 2000 index of small-cap stocks looked poised for a weekly drop of almost 3%, its biggest one-week decline since February 2016. It is now on track for its biggest weekly drop since the week before the November 8 US presidential election.


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