Monday, investors are now lessening their acquaintance to riskier assets right after North Korea have showed sixth and most powerful nuclear test on Sunday, giving way for the Japanese yen to ascend higher against the United States dollar. In the early Asian trade, the greenback collapses and traded at 109.22 yen and last fetched at 109.81 yen JPY=, which was below 0.4% from late United States trade on Friday.
In accordance to the nuclear test conducted by North Korea on Sunday, analysts are claiming that this prompts the warning of an immense military response from the United States if ever the country or its allies were threatened. This current event amplified risk aversion, making investors lower their exposure to risk, thus making the safe-haven yen end up with gains as the yen is frequently used as a funding source to purchase riskier assets.
In addition, the currency’s rise was the result of investors selling riskier assets, with the MSCI’s index of Asia Pacific shares outside Japan plunging by about 0.4%. On Friday, the MSCI’s estimate of Asian equities touched its highest intraday levels since December 2007.
Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne said that yen has organized its gains after pushing higher, suggests that market members are not expecting any prolonged market commotion right after the latest nuclear test performed by North Korea.
Dooley also said that Market members possibly favor North Korea’s actions as attempts to gain negotiating influence. Steven Dooly also said that this is how it has played out before. That market participants increased their rhetoric, their aggression for them to gain negotiating advantage.