Growing tension between the US and North Korea boosted the Swiss franc, the Japanese yen, gold and government bonds as investors sought out traditional safe havens at a time of geopolitical uncertainty.
Nervous trading marked the 10th anniversary of the start of the financial crisis on Wednesday, after Donald Trump’s warning that North Korea faced “fire and fury like the world has never seen” if it continued to make threats against the US.
Gold rose to its highest level in almost two months, while the Swiss franc increased by more than 1% against the US dollar and saw its biggest one-day gain against the euro in more than two and a half years. South Korea’s won currency dropped 0.9% against the dollar.
Kathleen Brooks, research director at City Index Direct, said: “The Swiss franc is the safe haven of choice today as risk sentiment gets hit from escalating nuclear fears between the US and North Korea. Unsurprisingly, the yen, which is still the second best performer in the G10 foreign exchange space, is playing second fiddle to the Swiss franc due to Japan’s proximity to the epicentre in Pyongyang.”
Shares fell in Asian and European trading after Pyongyang responded to the US president’s tough language with a threat to launch a nuclear strike on the US Pacific territory of Guam.
Tokyo’s Nikkei index had dropped 1.3% by the time European stock markets opened on Wednesday morning, with similar falls on the German and French bourses. The FTSE 100 ended 44.67 points lower at 7498.06.
But the prospect of hefty losses on Wall Street stocks was averted when US secretary of state Rex Tillerson said there was “no imminent threat of war” and that Americans could “sleep well at night”.
US investors saw Tillerson’s comments as evidence that the stand-off between Washington and Pyongyang would be settled by diplomacy rather than by military means. Falls of just 0.3% were recorded by both the Dow Jones industrial average and the more broad-based S&P 500 in early trading.
Mike van Dulken, head of research at Accendo Markets, said: “Equities are nursing losses thanks to an unwelcome escalation in geopolitical tensions between the US and North Korea, both trading nuclear threats that have awoken volatility from its slumber and seen risk assets shunned in favour of the traditional safe havens.”
In another sign of the risk-averse mood, investors moved money into government bonds. The yield – or interest rate – on a benchmark 10-year US Treasury bill dropped to 2.24%, while a 10-year German bund was yielding 0.43%.
Gold rose 0.6% to $1,268 (£976) an ounce and platinum gained 0.6% to reach $972.95 an ounce, having hit its highest since April at $979. Silver rose 1.7% to $16.70 per ounce.
“The market hates uncertainty and that’s certainly what we have now,” said Ole Hansen, head of commodity strategy at Saxo Bank.
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