Safe Havens Benefit from Geopolitical Worries

Paterniano Del Favero
Agosto 10, 2017

Gold prices closed at a one-week high Wednesday as rising tensions between the USA and North Korea pushed investors to seek safety in haven assets.

President Donald Trump warned North Korea on Tuesday about facing "fire and fury" if North Korea delivers more threats against the U.S.

Shortly after Trump made his remarks, North Korea said it was "carefully examining" the idea of a missile strike on Guam, a U.S. Pacific territory. US Defense Secretary Jim Mattis told Pyongyang it should stop any actions that would lead to the "end of its regime and the destruction of its people". Analysts say that the safe haven pairs are likely to continue to be sought out by investors as the tensions escalate.

"Geopolitics splashed cold water on the markets", said JJ Kinahan, chief strategist at TD Ameritrade.

But the prospect of hefty losses on Wall Street stocks was averted when U.S. secretary of state Rex Tillerson said there was "no imminent threat of war" and that Americans could "sleep well at night". Earlier, the pair hit a peak of $0.73684 while the session low stands at $0.73190. The FTSE 100 index of leading British shares was 0.7 percent lower at 7,489.

Traditional safe-haven currencies including the Swiss franc and Japanese yen rose against the USA dollar, while those from emerging markets slid.

Gold prices were nudged away from recent highs as broader risk aversion receded somewhat.

The bid for safe havens also pressured the Australian and New Zealand dollars.

South Korea's won dropped 0.9 per cent against the USA dollar to its lowest close since July 13.

The Swiss franc, a barometer of risk sentiment, surged 0.6 percent to 0.9688 francs against the US dollar, reversing a two-week losing streak.

The dollar was steady at 110.005 yen after going as low as 109.560 overnight, its weakest in eight weeks. "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".

The Swiss franc on Wednesday held near the day's highs after posting its biggest single-day rise against the euro since the central bank removed its cap on the currency in January 2015. It was last up 1.1 per cent at 1.1321 per euro.

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